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Regulation and compliance primary barriers to investment in private debt: Tradeteq

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Regulatory and compliance issues are the most significant barriers to investment in private debt, according to 63 per cent of respondents to a Tradeteq survey of more than 200 finance professionals from the private debt and trade finance arena. Meanwhile, 86 per cent of trade finance professionals believe that trade financing will expand from banks and alternative lenders into embedded lending.

The full set of responses is as follows:

What factors do you think may currently prohibit investment in private debt assets?

Regulatory and compliance – 63.2 per cent

Technological limitations – 20.6 per cent

Investment transparency – 10.3 per cent

Other – 5.9 per cent

Do you believe trade financing will expand from banks and alternative lenders to be integrated into business-to-business platforms such as logistics and e-commerce?

Yes – 86 per cent

No – 4 per cent

Unsure – 10 per cent

Both private debt and trade finance assets have witnessed remarkable growth in recent years, as investors shift to alternative assets to create a diversified, stable source of income amid interest rate rises and ongoing volatility.

Total assets under management allocated to private debt are expected to hit USD2.3 trillion by the end of 2027, increasing at a faster rate than alternatives overall. However, USD400 billion of the USD1.5 trillion current size of the private debt industry has still not been deployed. 

Similarly, while trade finance has seen global goods exports grow by 26.6 per cent and 11.5 per cent in 2021 and 2022, there remains a trade finance gap of USD2.5 trillion, a sign of the limited financing available to meet increasing demand, the firm writes.

Tradeteq’s platform converts trade finance and private debt assets into tradeable securities, thereby creating much needed liquidity in both markets. More than USD3 billion worth of notes have been issued under the platform’s securitisation as a service offer, and Tradeteq has serviced over 140 clients, which have collectively financed more than two million instruments through the platform.

Mattia Tomba, Head of International Markets at Tradeteq, says: “These results should serve as a call to transform access to private debt and trade finance investment, at a time where demand for both is growing rapidly. With any shifts in regulation and compliance likely to take time, Tradeteq’s mission to facilitate transactions between institutional investors and trade finance and private debt originators is a swifter solution to creating liquidity in a traditionally opaque market. This is vital to boost corporate lending, which is one of the key factors that will ensure every great idea is funded and help accelerate economic recovery.”

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