Kavitha Ramachandran, head of business development and client management (continental Europe) at Maitland Fund Services, spoke to Silver Kung, chairman and CIO of Siegfried Asset Management, about how his company is navigating geopolitical uncertainty and supply chain issues – and the importance of having partners you can rely on in times of turmoil. (For professional investors only)
How do you perceive supply chain problems to be impacting asset managers – and your own fund?
During Covid, there have been numerous issues globally which have impacted the wider economy and asset managers as a result. Our fund runs a last-mile strategy, in which we only purchase debt where the buyer has already signed off receipt of the goods. Much of what we cover are items like clothing and furniture, which have been less impacted by geopolitical issues. We primarily service SMEs in Asia who sell on an account basis to Europe and North America. Buyers often take up to six months to pay, so Seigfried buys accounts receivables at a discount, so that manufacturers can be paid sooner.
Ironically, despite supply chains being our area of focus, disruption in certain areas of the supply chain has little impact on our funds.
What can fund managers do to reassure investors when it feels like there is turmoil on all sides?
From our perspective, we have set-ups in Hong Kong and Taiwan, and all of our platform is online – our funds are registered either in Luxembourg or the Cayman Islands. We always communicate with our investors and ensure we are being proactive in terms of issues that may concern them. It is also important to strengthen relationships with your own suppliers. As a fund manager, we have a duty to explore all options but have used Maitland for several years as they understand our product very well and we have the chemistry that has been built over the years, resulting in a partnership approach with Maitland that means we feel supported.
What flagship supply chain issues will dominate the news in the coming year?
Siegfried only purchases debt from buyers with an investment grade credit rating, and primarily from firms in Western Europe and North American where economic and geopolitical risks are lower. The issue we are watching the most closely is the China/US tension. Most of our goods are manufactured in China and Southeast Asia. In the event of conflict there could be major disruption to ocean shipping. The investment universe would undoubtedly become more restricted or limited.
It feels like globalisation and international trade is less robust than it was five years ago. How are you responding?
We aim to build resilient portfolios that target to deliver consistent returns, even in volatile markets. Our funds arguably benefit during times of turmoil, as investors try to hedge their positions – we have very low correlation to wider stock markets. Regardless of the geopolitical situation, international trade will remain as the essence of global growth, and we believe that receivables financing is an up-and-coming asset class that supports international trade.
Inflation has been in the headlines. How well-equipped do you think central banks are to deal with it, given much of it results from geopolitical and supply chain difficulties?
We named the fund after Seigfried the Dragon Slayer, from the German legend, with the ‘dragon’ in this instance being inflation. This asset class is the only asset class I think of with investment grade credit. Overall, our credit rating is A, but the interest rate payments are from SMEs in Asia. Many of them don’t have access to credit because the banks only serve larger businesses. The thing that is important to them is to get liquidity, whether the rate is higher or lower is not their concern.
The other point to make is that inflation is not really here, in China and Taiwan – it’s about 3%. The environment is much more controlled due to the government.
Maitland Luxembourg S.A. is a Professional of the Financial Sector (“Specialised PFS”) authorised and regulated by the Commission de Surveillance du Secteur Financier (CSSF) under licence number P00000214. Maitland Luxembourg S.A. holds a “Conseil Economique Licence” under licence number 72662. MS Management Services S.A is an Alternative Investment Fund Manager and Chapter 16 Management Company in Luxembourg and is regulated by the Commission de Surveillance du Secteur Financier under licensed numbers A00000548 / S00000983.
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