HSBC announced Trade and Working Capital Solutions strategy for institutional investors - Trade Treasury Payments

HSBC Asset Management has launched a Trade and Working Capital Solutions strategy, giving institutional investors access to the bank’s extensive trade finance deal flow. This move opens a traditionally bank-dominated market to institutional capital seeking returns tied to real economic activity.

The solution, developed in partnership with HSBC’s Global Trade Solutions business, comes as investors increasingly seek alternatives uncorrelated with traditional market movements. It leverages HSBC’s position as the world’s leading trade finance bank, which facilitated $857 billion in trade volume during 2024 and accesses approximately 85% of global trade flows.

The solution’s market position and approach

HSBC’s entry into the institutional trade finance space is an extension of the bank’s core strengths. By combining its origination capabilities with asset management expertise, HSBC creates a channel for institutional capital to flow into trade finance while maintaining appropriate governance boundaries.

The strategy includes receivables finance, supply chain finance, trade loans, and letters of credit. While HSBC sources these opportunities through its global banking network, HSBC Asset Management maintains independent authority over investment decisions. This structure would help avoid potential conflicts while allowing investors to benefit from HSBC’s market position and origination capabilities.

Investment characteristics and value proposition

Trade finance assets offer several characteristics attractive to institutional portfolios. Their short-term nature provides natural liquidity, while their connection to physical trade flows rather than financial market dynamics can deliver uncorrelated returns.

Additionally, these investments come with certain considerations. For example, their private market nature can create valuation complexity and potential illiquidity. Economic conditions may impact performance, while credit and counterparty risks require careful management.

These factors must be weighed against the potential benefits of low correlation to traditional markets, attractive risk-adjusted returns, natural liquidity from self-liquidating structures, and historically low loss rates, given the operational importance of trade finance to businesses.

HSBC’s strategy value proposition centres on differentiated access, aligned interests, and risk mitigation. Investors gain entry to diverse transaction flows spanning geographies, industries, and counterparty types that would be difficult to access independently. HSBC would also maintain exposure to borrowers, participating alongside investors in a risk-sharing model rather than a pure originate-to-distribute approach. This creates meaningful alignment between the bank and external investors.

According to Martin Schmitt, Portfolio Manager of the strategy, “HSBC’s Trade and Working Capital Solutions can offer investors compelling diversification and resilient returns, leveraging our position as the world’s leading Trade Finance bank to deliver potentially attractive opportunities.” 

What will be the institutional impact?

HSBC’s formalisation of institutional access to trade finance is a significant market development.

The long-term impact depends on the success of implementation, market reception, and performance outcomes. If successful, HSBC’s initiative could accelerate the evolution of trade finance from a bank-dominated activity to a more broadly distributed institutional asset class.