FHIM Trade Logistics 2021 - Australian Bond Exchange

FHIM Trade Logistics 5.50% Senior Notes

Senior Fixed Unsecured Unsubordinated Rate Note
5.50% fixed rate paid quarterly
3.8 year Note
No currency exposure and all coupons and any final value in Australian dollars, without exposure to the exchange rate of the underlying fund
Sophisticated Investors Only. Contact Us to discover if you meet the requirements.
Will be added to ABE/IRESS trading platform to improve secondary market liquidity

Issuer Overview

TradeFlow Capital Management (TradeFlow) is the world’s first fintech-powered commodity investment strategy and business which enables physical commodity trading for small and medium-sized firms. TradeFlow uses its own Digital Trade Services platform to be scalable and manage and monitor and track cargoes all over the world. This is now made possible as a fund manager as a result of the lower cost of technology and the advent of Internet of Things (IoT) devices and artificial intelligence.

TradeFlow was developed to fill a gap in the trade finance business of SME’s where the major banks found it too costly to operate because of KYC/AML requirements. They essentially found a competitive advantage and exploited it.

The Fund avoids the pure credit risk faced by traditional trade finance solutions, and replaces this with real-world insurable physical risks. As such, each transaction is individually insured with Marine Cargo All-Risk Insurance by a diversified group of reputable and highly rated insurers.

The Fund achieves these steady returns by gradually, in a staged manner, entering into multiple matched purchase and sale contracts for a diversified range of commodities from suppliers at a fixed price on behalf of the end buyers, and an onward sales contract to the end buyer at a fixed price.

The title of the commodity is transferred to the Fund for the duration of the shipment (on average 40 days, but no more than 90 days), and released after payment and verification upon arrival at its destination. As the trades buyer and seller are matched and the price is fixed, the fund avoids direct exposure to commodity price risk, unless the end buyer was to default.

The average value of each transaction is approx. $800k and there are over 600 qualified SME’s guaranteeing diversification and minimising risk. There is no credit extended to counterparties which again supports a very conservative approach to the business model. To date the rate of default is immaterial.

The business model is very robust, very scalable based on the technology and has huge upside given the size of the market which based on recent numbers amounts to approx. $2 trillion.

This statistically low default risk is mitigated by the Fund’s risk management methodology and the “trade support fee” feature; in which the buyer pays the Fund a volatility based margin that acts as a security deposit/buffer. The margin may be topped up or “called” by the Fund as the need arises, similar to the approach used by modern day financial market clearing houses.

The TradeFlow Funds take a neutral principal position and direct ownership of the commodities during shipment or during a pre-agreed storage period. As the Fund does not lend money nor give credit it offers a truly asset backed strategy and one which does not compete with banks and traditional trade finance lending sources. The Fund offers investors a globally unique non-credit approach to get access to the low risk, low default, and diversified returns available from the trade finance asset class.

You can view the TradeFlow capital introduction video here.

These Notes are linked to a shipping and trade finance from Tradeflow Capital Management Pte Ltd, and issued by AMAL Trustees Pty Ltd as trustee for Ferguson Hyams Investment Management. It offers investors a globally, unique, non-credit approach to get access to the low risk, low default, diversified returns available from the trade finance asset class.

Key Information

Bond: FHIM Trade Logistics 2021-1 5.50% Notes maturing 18 October 2025
Bloomberg Name: FHIM 21-1 A-R
Bloomberg ISIN: AU3CB0286151
Debt Type: Senior Unsecured Unsubordinated
No currency exposure: the bond coupons and any final value are in Australian dollars.

Risks

The risks listed below are some but not all of the risks associated with the activities of an investment in the Notes

Credit Risk: An event of default underlying fund level which means distributions cannot be made under the FHIM 5.50% Senior Notes due 2025 which may result in a loss of principal invested and/or interest due under those Notes.

This risk is mitigated by:

The short-term nature of the transaction in the underlying fund
The frequency and volumes of these trades which underpin the funds strategy
There have been no credit or market default events since the Fund’s inception

Market Risk: There is an underlying risk with the TradeFlow Fund if TradeFlow is unable to secure trade receivables financing between buyers and sellers within the commodities trade cycle.

This risk is mitigated by:

The factors referred to under ‘Credit Risk’ above;

Liquidity risk: You may not be able to realise your investment when you want to. The Issuer Buy-Back facility is at the discretion of the Issuer, AMAL Trustees Pty Ltd as trustee for Ferguson Hyams Investment Management. Issuer Buy-Back requests are determined at the Issuer’s discretion

This risk is mitigated by: