Interviewed by Nikkei Veritas, Japan's leading weekly investment and financial news title, on the Supply Chain Finance (SCF) strategy, trade receivables, and how credit risk is contained.
“We surpassed ¥200 billion [in cumulative Japan AUM] in September. Given its low correlation with stocks and bonds, it appears attractive to investors seeking absolute returns amid the unstable market conditions of 2022. It is especially popular with banks that apply strict risk-management standards.”
“Since the strategy's inception in 2018, there has been no default, and monthly returns have never turned negative. This defensive positioning comes from investing in the trade receivables of small and mid-sized enterprises that export to major companies in the U.S., Japan, and Europe. Counterparties include strong, investment-grade names rated triple-B-plus or higher — such as Cisco Systems and Costco Wholesale in the U.S., Sony Group (6758) in Japan, and Siemens in Germany — which keeps default risk contained.”
“At the same time, exporting companies have strong demand for working capital, so a high yield can still be earned. The source of risk and the source of yield are separate, and compared with conventional corporate bonds of similar credit rating, these receivables carry shorter maturities. We invest in dollar-denominated receivables and do not take on currency risk.”
“Banks, which traditionally provided this kind of financing, are withdrawing from trade finance because of regulation and anti-money-laundering (AML) requirements. Meanwhile, technological innovation is automating and digitizing trade settlement, and new capital providers such as funds are emerging.”
“We bring in factoring companies as intermediaries to help manage fraud and credit risk. A strength of this structure is that, in the event of a default, there is a guarantee we can call on.”
“It will likely keep rising. Local banks tend to prioritize lending to large corporations and state-owned enterprises, which makes it hard for SMEs to obtain financing. Dollar strength from U.S. monetary tightening, combined with weaker local currencies, is boosting exports and increasing capital demand further.”
“The global shortfall in funding supply for SME capital needs runs into the trillions of dollars, with the Asia region accounting for the majority…”
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