Strategy
Each asset class was selected for what it does that the others cannot.
Held together, the short book provides scheduled income and liquidity, the policy book provides a steady flow of policy proceeds and the asset value behind principal, and liquidity held for the purpose bridges the two.
Long duration
Senior Life Settlements
Longevity, contractually paid.
A life settlement is an existing life insurance policy that its owner, typically a senior, sells for more than its surrender value. The buyer assumes the premiums and receives the face amount when the policy matures.
The value of a policy is governed by longevity, not by markets, and its face amount is an obligation of insurers rated A or higher by A.M. Best. Policies are acquired well below face, priced on independent life-expectancy reports, to be held in trust for bondholders.
In the portfolio, they are the source of principal support and long-term value.
Principal risk. Proceeds that arrive later than modelled increase premium costs and delay available cash.
Why institutions allocate
Decorrelated by nature
The timing of a policy's maturity bears no relation to interest rates, equity markets or the credit cycle.
Paid by highly rated insurers
The face amount is a contractual obligation of life insurers rated A or higher by A.M. Best, institutions that are well capitalised and closely regulated.
A defined amount
What a policy pays is fixed in its contract. Returns come from cash actually received, not from valuations marked to market.
Bought below face
Each policy is acquired at a discount to its face amount, with face of at least one and a half times its cost.
Fair to the seller
The policyholder receives more than the insurer's surrender value for a policy they no longer need or can no longer afford, instead of letting it lapse.
A settled legal foundation
The right to sell a life insurance policy was confirmed by the United States Supreme Court in 1911, and the market is regulated in 43 states.
Actuarially priced
Every policy is valued on independent life-expectancy reports from recognised medical underwriters, using standard actuarial tables.
A natural complement to credit
Long-dated and contractual, life settlements sit beside shorter credit assets as a fixed-income alternative with a different source of return.
Short duration
SME Loan-Backed Notes
Bank-originated credit, secured by real assets.
The Company holds senior secured notes backed by portfolios of senior secured loans to established small and medium-sized enterprises (SMEs) in Western Europe, including working capital and inventory finance facilities.
The underlying loans are secured by hard collateral, including mortgages over real property, pledges over inventory and assignments of receivables. The notes are issued by established banks, rank first in priority of payment, and target collateral cover of 1.25x to 2.0x for each facility.
The loans amortise on schedule, and in the portfolio they provide recurring income.
Principal risk. Borrower defaults and weak recoveries can reduce cash flow, even when the loans are secured.
Why institutions allocate
Bank-originated
The notes are issued by established banks that know their borrowers and service the loans.
Hard collateral
Mortgages over property, pledges over inventory and assignments of receivables, with a target cover of 1.25x to 2.0x for each facility.
First in line
Senior notes rank first in the order of payment.
Scheduled cash
Working-capital and inventory loans pay interest and amortise on a known timetable.
Established borrowers
Every borrower has at least seven years of operating history.
Granular by nature
A single note spreads its exposure across many businesses and sectors, so no single borrower decides the outcome.
The backbone of the economy
SMEs account for the great majority of businesses in developed economies, yet still depend overwhelmingly on bank credit.
Capital banks wish to recycle
Banks increasingly package SME loans into notes to free their balance sheets, and private capital is taking the place they leave.
Shortest duration
Trade Receivables
Self-liquidating credit, tied to real goods.
The Company holds notes backed by, and direct interests in, short-term, self-liquidating trade receivables arising from international trade in goods and commodities, originated through Singapore.
They are supported by bank payment undertakings, including documentary letters of credit, bills of exchange or promissory notes. Each receivable is repaid from the sale of the goods it financed, typically within 30 to 180 days.
In the portfolio, it provides liquidity between coupon dates.
Principal risk. Disputed, delayed or duplicate receivables can prevent the expected payment.
Why institutions allocate
Self-liquidating
Every receivable is repaid from the sale of the goods it financed. Nothing needs to be refinanced for the investment to return.
Short by design
Capital comes back within 30 to 180 days and is redeployed, so the book renews itself several times a year.
Real goods behind every claim
Each transaction is secured on goods in transit or in storage and on the documents of title that control them.
A bank between buyer and risk
Letters of credit, bills of exchange and promissory notes place an issuing or confirming bank behind the buyer's promise to pay.
Insured where it matters
Trade credit insurance covers the buyer's failure to pay where the structure calls for it.
Controlled collections
Payments flow into controlled collection accounts, never through the hands of the party financed.
Institutional origination
Banks and specialist trade finance houses originate, administer and collect each transaction. VSJ Ventures LTD provides the capital.
A record of low loss
Across decades of data collected by the International Chamber of Commerce, trade finance has shown some of the lowest default rates of any form of corporate credit.
Decorrelated
Returns depend on the completion of commercial transactions, not on the direction of equity or bond markets.
Liquidity for the portfolio
The short tenor bridges the dates between coupons and keeps cash available for the premiums of the long book.
A structural gap
As banks have withdrawn, the Asian Development Bank estimates the global trade finance gap at USD 2.5 trillion. The shortfall is structural, not cyclical.
The oldest credit of all
Trade finance has funded commerce for centuries, and its instruments rest on mature, tested rules such as the ICC's Uniform Customs and Practice for Documentary Credits.
How the three fit together
Trade receivables
Liquidity
30 to 180 days
SME loan-backed notes
Recurring income
Short dated, amortising
Life settlements
Principal support and value
Long duration
| Life settlements | SME loan-backed notes | Trade receivables | |
|---|---|---|---|
| Role | Principal support and value | Recurring income | Liquidity |
| Cash timing | Contractual amount, uncertain date | Scheduled interest and amortisation | A single payment within months |
| Paid by | Insurers rated A or higher | Banks and SME borrowers | Buyers and their banks |
VSJ Ventures LTD does not originate or service any of these assets itself. Established banks and recognised financial institutions originate, administer and collect them.