Contributors: Ian Henderson , Chief Investment Officer; Hasan Juma, CPA, CIPA , Chief Executive Officer (Alteia Capital).
Over the past few months, Alteia has attended several industry events, including Arab Investor Conference, AFSIC – Investing in Africa , Global Trade Review (GTR) , and Money20/20 , as well as a number of closed-door investor meetings, alongside our ongoing discussions with both long-standing partners and prospective investors.
What these interactions made clear is that having an interest in a strategy and allocating capital to it are two entirely different realities.
An investor may completely align and understand how a strategy works, value its risk-adjusted return profile, and place a total confidence in the manager, but an allocation is never guaranteed. The final decision comes out of the investment process, in which the strategy is assessed against the investor’s current portfolio design, mandate constraints, liquidity requirements and against what the investor needs the allocation to achieve.
What is it, then, that makes an allocation follow once the investment case holds, and what determines its size?
Finding a place in the portfolio
Before deciding how much to allocate to trade finance, an investor must first solve a structural puzzle. The answer might not be always obvious, but depending on the portfolio’s architecture, trade finance can comfortably fit within private credit, alternative assets, or a dedicated specialty finance allocation. It is commonly sized as a sleeve within that parent allocation, which means the parent allocation largely sets the ceiling.
The role also differs by perspective. For a specialist manager, trade finance is the core strategy: regular, asset-backed income generated by real goods moving through supply chains. For an allocator, it is more often a short-duration, diversifying sleeve whose returns are expected to behave differently from longer-duration credit and other assets classes.
Hasan Juma notes that a trade finance allocation is typically added within a broader private credit or asset-backed finance mandate and is often described as a semi-liquid bucket that sits between closed-end private debt and daily-liquidity bond funds. Ian Henderson adds that trade finance is frequently viewed as real-economy exposure, with performance that is not driven by daily market volatility.
Both views are valid and they reflect different objectives, and the gap between them is not unique to trade finance. Goldman Sachs Alternatives’ 2026 Global Alternatives Survey points to the same pattern seen in private markets – appetite for these strategies remain high, but actual allocation is constrained by liquidity, manager selection and capacity to commit new capital.
Risk-adjusted returns are only part of the decision
Yield or an attractive return is a great starting point, but it never tells the whole story. Investors need to understand what risk they are being compensated for and how the expected return compares with other opportunities available to them.
In trade finance, the quality of underlying transactions matters just as much as the returns they are expected to generate. Investors need to consider the counterparties involved, the source of repayment, the security arrangements and the manager’s ability to monitor transactions throughout their life cycle. When a transaction does not go as planned, a manager’s hands-on experience becomes the critical factor. Institutional investors are used to assessing opportunities against familiar credit benchmarks and risk categories. Trade finance portfolios may not always fit neatly into these comparisons, especially when the underlying exposures are unrated. This makes the manager’s ability to explain the risks, underwriting approach and portfolio composition very important. Then there is the liquidity management which also requires a careful inspection. Trade finance transactions may have relatively short cycles, but this does not automatically make an investment in a trade finance fund liquid. The timing of underlying repayments and the terms under which investors can withdraw capital are two different matters.
Similar considerations also apply in Shariah-compliant investment markets, although the investment framework differs. Hasan Juma notes, that for investors considering Shariah-compliant trade finance, compliance is the entry condition. Once it is confirmed, the strategy must still be assessed on income visibility, asset quality, the independence of Shariah board, governance and liquidity, including how it compares with other available investments, such as sukuk. Short-duration, asset-backed trade finance (structured through contracts such as Murabaha or Musharaka on identified goods) sits between more liquid options and Islamic money-market placements, and less liquid ones, such as real estate, infrastructure and private equity. Its case rests on short tenors, asset backing and regular income distribution, set against limited historical and market data compared with other asset classes.
The investment makes sense, but the allocation does not
Even when an investor is comfortable with a strategy, structural portfolio hurdles may get in the way of a great pitch. If an investment committee approves of a manager and finds the expected return attractive and is satisfied with the manager’s experience, internal limits dictate the final move regardless of the merits of the opportunity.
Ticket size also creates the mismatches. Some institutional investors need to deploy amounts that a specialist strategy cannot readily accommodate without changing its portfolio composition or concentration. Others may find that the available size is too small to justify the time and resources required for due diligence and ongoing monitoring. Documentation and fraud-diligence demands can be heavy relative to the size of the commitment, and some allocators require more transparency on transactions, collateral and lien positions than the investment vehicle provides.
Finally, timing introduces another constraint where an investor may be interested in a strategy but have committed elsewhere, face upcoming liquidity requirements or be waiting for an existing investment to mature before making a new commitment. There is also a responsibility on the manager’s side. A larger allocation may be commercially attractive, but it should not come at the expense of underwriting standards, transaction quality or portfolio concentration limits.
So, a “no” today is not necessarily a rejection of trade finance. It may simply reflect the realities of portfolio management, where every new investment needs to be considered alongside existing commitments and competing opportunities. It may simply mean that the investment case is understood, but the conditions for making an allocation are not yet in place.
For trade finance managers such as Alteia, this reality also shapes how we engage with allocators. It is not enough to simply explain how a strategy operates or what return it targets. The more useful contribution is helping allocators work through their own questions: understanding where the strategy fits, how its underlying risks are managed and what role a trade finance allocation could realistically play alongside their existing investments.
