Conservative, fixed income investments are in strong demand. Yields and premiums for investment grade investments have reached historic lows, but investors are stepping up their buying spree in the face of the Corona pandemic and market uncertainty. In the current market environment, there are other alternative, more attractive and safe interest baring investments available then traditional bonds.
Private debt in the form of receivables finance
Receivables finance bridges the gap between corporations looking for liquidity and short-term financing and investors looking for safe investments and fair risk premiums. Being privately arranged financing agreements, external shocks have a limited impact on these as long as credit fundamentals remain sound. A receivables finance portfolio has an additional layer of safety on top of the seller’s solvency. It is an asset-backed, cash-flow generating portfolio of a short-term nature (invoices with lifespans generally below 90 days) with broad counterparty (obligors) diversification and a very conservative investment characteristic.
Receivables finance, being a very flexible financing tool and short-term liquidity instrument, helps companies to optimize their working capital and gain flexibility, especially in times of market uncertainty. Investors profit of pre- agreed interest payments with fair risk premiums and excellent transparency on a broadly diversified portfolio of collateralized invoices. Investors and companies benefit.
An allocation to receivables finance investments provides a great value contribution to any portfolio by increasing overall portfolio yield while reducing risk and volatility at the same time.