Contributors this month: Ian Henderson Chief Investment Officer, Eran Singh Portfolio Manager, Nkateko Maimane (Tumi) Investment Analyst, Donovan Lindhorst Head of Risk and Legal and Kevin Ramsamy FCCA Chief Executive Officer
Diversification is often discussed in broad terms, across regions, sectors or commodities. In stable market conditions, portfolios can appear well diversified on paper. The real test comes when disruption begins moving simultaneously across supply chains, logistics routes, counterparties and working capital cycles.
Recent tensions around the Strait of Hormuz highlighted how quickly operational dependencies can emerge across global trade flows. Shipping cycles extended, insurance markets tightened, commodity prices became volatile and working capital requirements shifted across multiple sectors at once.
What this revealed is that portfolio construction in trade finance is rarely driven by geography alone. In practice, exposures are structured across multiple interacting layers simultaneously: counterparties, suppliers, buyers, goods type, deal structure, tenor, repayment profile and operational dependencies.
As Ian Henderson explains:
“As a fund we operate within investment parameters that drive diversification. However, a further layer of portfolio management takes place to ensure there is diversification of suppliers and buyers on a trade-by-trade, borrower-by-borrower basis.”
This creates a dynamic rather than static approach. Exposure limits exist formally within investment mandates, but structural balance continues evolving at transaction level as trade flows, counterparties and market conditions shift.
“This drives actual diversification however this is dynamic and often seasonal aspects may have an impact or require short periods of time where there are elements of increased concentrations”, Ian adds.
Diversification under operational stress
One of the clearest lessons from recent disruptions was that portfolios which initially appeared diversified could still become exposed to the same operational bottlenecks under stress.
Commodity prices became increasingly volatile, container availability tightened and shipping cycles extended as routes and logistics patterns adjusted to changing market conditions.
Ian notes:
“Market prices of the likes of urea and sulphur started spiking and we received countless enquiries to finance the increased cost of these products from existing and prospective borrowers. Prices and availability of containers was also volatile and a number of clients advised that shipping times and working cycles needed to be extended.”
The disruptions were not limited to logistics alone. Compliance complexity also increased as trade flows adjusted and counterparties sought alternative financing solutions. Ian continues:
“Increased compliance checks on new trades/proposed borrowers and contracts as Russian products were readily available in the market and the apparent US relaxation of sanctions also caused numerous traders to seek financiers willing to fund these cargoes/deals.”
The immediate impact of the disruptions was not necessarily portfolio impairment, but pressure on timing, liquidity and working capital cycles. Transactions that appeared unrelated were suddenly connected through shared shipping routes, insurance markets, USD liquidity constraints and commodity pricing shocks.
This became particularly visible in relation to USD funding availability and payment timing across different regions.
As the credit team observed:
“Although borrowers may operate in different regions, most still rely on access to USD to service their loans, meaning that a USD shortage can impact multiple countries simultaneously.”
Similarly, operational dependencies became more visible once disruption began affecting insurance and logistics markets simultaneously. Eran Singh explains:
“As we require that all our financed collateral be insured, the withdrawal of cover specific to the Arabian and Persian Gulf did affect unrelated businesses who use these seas equally.”
The disruptions also reinforced how quickly supply chain stress can move through broader trade ecosystems. Tumi Nkateko notes:
“The global trade flows remain linked but the impact is one of timing. No traffic via the Strait of Hormuz means vessels, cargoes and containers are stuck and often in the wrong place. This requires time to reset and reposition.”
For certain sectors, the effects extended well beyond shipping itself. The credit team noted that increased competition for fertilisers and related agricultural inputs was already affecting production economics across parts of Africa, while insurance costs and logistics volatility were placing additional pressure on borrower margins.
“This means the operating and profit margins for borrowers need to be reviewed and monitored to ensure Alteia continues to fund profitable transactions and borrowers.”
Beyond logistics, disruption can also emerge through regulatory intervention, export restrictions and changes in local production requirements, all of which can alter portfolio behaviour unexpectedly.
The investment analyst pointed out:
“Zambia or DRC ban the export of raw minerals but require beneficiation plus government royalties to be paid. This changes the time and cost of production and affects volumes being exported until a new normal is established.”
Short duration and operational flexibility
The recent disruptions also highlighted the importance of short-duration structures during periods of operational uncertainty.
Short tenor allows portfolios to reposition exposure more quickly as conditions evolve. At the same time, volatile environments can create challenges around replacing assets and maintaining deployment discipline.
As Ian explains:
“Short term duration of the underlying assets means you can exit certain financings/trades but it can also present challenges on asset replacement and the need to make investment decisions where pricing and underlying risk factors may be volatile.”
Portfolio resilience comes more from adaptability than from static structure. Donovan Lindhorst, Head of Risk & Legal, describes what happened operationally:
“Alteia’s portfolio remains diversified. However, we have observed patterns in the methods to address these disruptions, such as switching from sea to air freight, or trucking freight across territories to UAE ports below the Strait of Hormuz, such as Khorfakkan or Fujairah, and the passing on of any increased logistics and insurance costs to offtakers.”
Clients demonstrated this flexibility in practice. Eran added:
“All clients are already inherently diversified and have been able to pivot logistics, using new routes, airfreight instead of sea freight, et cetera, within a week.”
A week, not months of restructuring. Within a week, operational adaptation was possible because short-duration structures meant no need to renegotiate underlying facility terms.
At the same time, exposure balance continued evolving organically says Eran:
“Having established a GCC/African link and a track record of good performance, Alteia is thereafter willing to fund directional trade flows unrelated to the prior GCC/Africa flow. Thus, an organic time-based geographical diversification develops.”
Hidden interconnections under stress
Many risks only become fully visible during stressed market conditions. Diversification that appears effective during stable periods can reveal hidden interconnectedness once logistics disruption, insurance withdrawal or commodity shocks begin affecting multiple layers simultaneously.
Tumi summarised this dynamic directly:
“Diversification may appear effective on paper when the portfolio has exposure to borrowers across different countries and industries. However, during stressed economic conditions, many of these exposures can become highly correlated.”
This is why operational due diligence and continuous monitoring remain central to portfolio resilience.
Donovan confirms the approach:
“Alteia conducts thorough due diligence on each of its client’s operations prior to facility implementation, which is where concentration risks are identified, discussed and addressed. Naturally, with our presence spread across Africa and the Middle East, our clients utilise different shipping lines, insurers, inspection agents and port facilities. A disruption which affects one service provider therefore has a limited impact on our other exposures.”
The real test is whether structures continue functioning when strain builds across multiple vectors simultaneously. Donovan reports:
“For Alteia, the current impact remains limited across the portfolio. Our transactions are structured around short duration, self-liquidating trade flows, with security and cash control mechanisms designed to respond to stress events at the commodity, borrower and route level, rather than relying on benign macro conditions. To date, we have identified no material disruption to repayment expectations, shipments or insurance cover across the portfolio. Although operational risk is not eliminated entirely, Alteia’s portfolio has proved to be operationally stable through global macro complexities.”
What investors actually ask
For investors, recent disruptions have reinforced a broader shift already underway across private markets. Increasingly, allocator conversations are becoming less focused on broad diversification narratives and more focused on downside behaviour, operational resilience and repayment visibility under stress.
Kevin Ramsamy explains:
“The key questions remain yield, risk management and liquidity.”
At the same time, periods of disruption quickly shift investor focus toward downside protection and capital preservation.
“There is usually an immediate level of concern that positions in the portfolio will not respond or perform so the first question is whether the investor is facing a loss of capital.”
These environments also reinforce the importance of understanding the mechanics of trade finance itself rather than relying solely on assumptions around geography or market perception.
“There is often a need to ensure the allocator understands the trade finance asset class first before dispelling any myths surrounding African trade finance.”
Resilience in practice
Diversification is often presented as a portfolio feature. In reality, it is a test. Disruption hitting multiple layers simultaneously reveals what a portfolio actually is.
Stress rarely exposes portfolios through a single event. More often, it reveals how deeply interconnected operational, logistical, liquidity and repayment dependencies already were. What appeared as separate risks turn out to be linked.
The Strait of Hormuz closure has tested this across global trade. Alteia’s portfolio absorbed the pressure because the structures were designed to function precisely when these kinds of failures occur. Short-duration trade finance, combined with disciplined construction and continuous monitoring, proved capable of absorbing pressure that collapsed other portfolios.
What ultimately matters in periods of disruption is whether the portfolio continues functioning as intended. When the Strait closed, investors got the answer they needed: capital remained intact. The structures had been built and they were ready.
Further information
If you would like to continue the conversation or learn more about Alteia’s approach to trade finance, you are welcome to connect with us on LinkedIn or reach out to the team at contact@alteiafund.com or infoksa@alteiafund.com. Any discussion is informational in nature and subject to applicable regulatory and compliance considerations.
