Finverity, a mid-market supply chain finance platform focused on emerging markets, has launched fund manager functionality, an industry first for the supply chain finance (SCF) sector.
This makes Finverity the first SCF platform to connect both institutional-level funders and fund/asset managers operating their allocations via segregated accounts, providing complete visibility and control over investments. The launch of this functionality addresses a key gap in the market and is expected to lead to an increase in investor flows and liquidity in supply chain finance.
Investor allocations to SCF are often routed through multiple fund managers or intermediaries. This has led to industry fragmentation and a lack of visibility and standardisation along the money chain. As a result, investors lack coherent and accurate reporting across all their allocations. Despite multiple lessons and red flags, most recently from Greensill’s collapse, investors in SCF to date have not been offered the required transparency and control over how their money is invested.
The banking sector’s traditional position as the main provider of funding to SCF has led to a lack of suitable investment infrastructure available to channel the growing flows from private capital sources into SCF as an asset class, particularly into mid-market companies in emerging markets, which is a focus region for Finverity. These investors are increasingly attracted by the potential high single digit yields coupled with the low risk that SCF can provide. A number of specialist, non-bank investment groups have grown in recent years and now account for the 20 per cent of the SCF market not controlled by large banks, according to Oliver Wyman.
Finverity’s new functionality addresses one of the most pressing investment infrastructure needs in SCF to date: the lack of a completely transparent ownership, allocation and reporting system connecting end investors to their respective fund managers and underlying portfolio of obligors.
Finverity’s segregated accounts enable investors to retain full ownership and control of funds and invested assets, while assigning the investment management responsibility to third parties (typically fund managers). The third party’s investment strategies are codified into sets of rules similar to an investment mandate, which are submitted to the end investor for approval. These are then hard coded into the allocation process. Any deviation from the mandate cannot be executed through the platform without consent from the end investor. Once approved, the end investor has full, real time visibility into the most granular level of SCF & factoring assets, which is at the invoice level, while also viewing their real time portfolio concentrations at a glance.
Investors using the Finverity platform will benefit from a centralised view (dashboard) of all their underlying deployment channels (fund managers or direct investment), enabling them to compare performance among fund managers, control portfolio concentration and have direct access to real-time reporting.
In parallel, fund managers also benefit directly from this improved functionality. By offering full visibility and real-time reporting to end investors they are able to address investors’ transparency concerns as well as market themselves by sharing proof of track record and thus, attract additional assets under management (AUM). In addition, Finverity’s platform provides fund managers with performance-enhancing tools such as internal digital workflows that enable better risk mitigation and real-time obligor performance monitoring. Just as significantly, the platform provides automation of back and middle office tasks enabling them to scale up AUM in a sustainable and cheaper way while maintaining high quality control.
Viacheslav Oganezov, CEO and co-founder, Finverity, says: “Investing in SCF has always been difficult for institutional investors and private capital due to a lack of appropriate infrastructure and industry fragmentation. We are looking to change that with the roll-out of the new fund manager functionality on the Finverity platform by seamlessly connecting various entities along the money chain and providing full visibility all the way through to the invoice level.
Only by instilling transparency and adequate control mechanisms enabled by technology can we increase investment flows into trade and supply chain finance and make it an established asset class outside of banks’ balance sheets.”
Alex Fenechiu, COO and co-founder, says: “The growing number of non-bank investors in the SCF market requires a specialist solution tailored to their needs, which are very different to those of large banks. The launch of Finverity’s segregated accounts is in direct response to the needs and issues we have observed in the market. We have been surprised at the number of investors who don’t actually know the overall yield being generated from their investments due to the lack of consolidated reporting systems available, and only have access to data on how much they are being repaid.
With transparency and real-time reporting as the core pillars of our design process, the launch of Finverity’s segregated accounts is yet another step in the right direction for the SCF sector. One that will be very costly and time consuming for our competitors to replicate”.
