A new partnership between GAO Capital and Straits Financial Group is set to introduce a new fund to support B2B trade, according to reports late last week. In an announcement, investment office GAO Capital revealed plans to launch GAO Funds with Straits Financial Group, set to begin operating by Sept. 1 of this year.
A key focus of the new fund will go towards commodity and trade finance. According to GAO Chief Executive Officer Chauwei Yak, the two partners provide crucial understandings of the global supply chain necessary to adequately finance cross-border trade.
“Straits’ parentage in logistics and warehousing, coupled with their in-depth understanding of the commodities market, both physical and derivatives, would put us in a unique position to partake in structured trade transactions and seize relative value investing opportunities in the market,” the executive said.
Yak added that the decision to enter the trade finance sector is a reaction to the current regulatory climate that has limited traditional banks’ ability to provide such services to businesses.
“We see the opportunity in trade finance with the retreat of the banks in the space, partly from Basel regulation forcing banks to hold more capital against trade finance loans,” she said.
Basel regulations are international, voluntary guidelines for financial regulators to assure banking stability through stress tests and other measures. Critics say that the rules harm SMEs’ access to financing. New proposals by the Basel Committee on Banking Supervision issued in March reportedly call for a 300 percent risk weight by banks for small business loan applicants, making banks less likely to issue financing to SMEs.
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Straits provides financial services under Asia-based logistics conglomerate CWT. GAO is also based in Asia, with headquarters in Singapore. The companies did not indicate whether they would focus their financing on businesses based in Asia.
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