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EFA Group: Connecting Worlds, Creating Impact Through Financing

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EFA Group: Connecting Worlds, Creating Impact Through Financing

Here at EFA Group, we see ourselves as enablers of growth; a mindful agent to connect different universes through financing. Pension funds, insurance companies, asset managers from developed economies such as Japan, Switzerland, United Kingdom have invested a total of US$1.2 billion into our funds. And at the heart of what we do is to deploy this capital responsibly, carefully and as simply as possible by lending to mid-market businesses globally.

We hold high regard for the responsibility given to us to manage and deploy the capital invested into our investment vehicles. Since the beginning, we have not strayed from our core expertise in trade finance.

By sticking to our DNA, with boots on the ground, and strong relationship-based approach, we continue to create meaningful impact to real economy companies worldwide by catering to their working capital and financing needs.

In 2017, our investors have helped us finance over 200 companies worldwide through over 4,700 transactions across the EFA portfolio of funds. In total, we deployed over US$4 billion of financing during the year, a 100% jump from 2016. That is also a new record for us and it’s all thanks to our investors.

With the pension fund of a 70-year old Japanese gentleman or a 65-year old lady in Nottingham, United Kingdom, we financed purchase of coffee beans from farmers in South America and the export of wheat from Australia to India. We participated in a loan syndication of pre-export financing of sugar and grains in Latin America. We helped finance the purchase of tin dredgers and built a road in Indonesia.

In essence, this is what EFA does every day, every month, every year – we bridge the gap between investors and companies, between businesses that need capital and investors that seek stable returns. We connect the worlds of pensioners in developed countries and farmers in emerging economies, and between sellers and buyers of physical goods and services.

From our humble beginnings in 2006 starting with US$2 million of capital from family and friends, EFA has come to be one of the largest commodity trade finance managers in the world, managing US$1.2 billion as a Group. And by leveraging on our existing infrastructure and proprietary network, we began to build and operate variations of investment models that make sense to our core expertise in trade finance.

In 2017, we saw a number of those variations come to reality. The Group’s first close-ended fund focusing on mid-term financing of assets, EFA Real Economy Income Trust, held its final close in September, deploying over US$250 million of capital into 14 projects.

At the same time, we continued to develop our trade finance vehicles to ensure AUM growth is maintained at optimum levels and utilization continued at a healthy pace throughout the year.

As a major player in the alternative credit space, EFA is the gateway for investors to access this growing asset class. Underpinned by structural challenges faced by businesses, SMEs are seeing the need for alternative and diversified pools of working capital, which is the lifeline of their business.

In 2018, our focus is to continue filling the gap between the two spectrums of investors and businesses. The key success factor to this is ensuring a healthy, controlled growth that is in the best interest of all stakeholders.

Our focus is to bring the existing funds to each of their optimum capacities, and at the same time, broaden our offering of investment vehicles that complement our core expertise. Some of these plans include a country-specific trade finance vehicle, and a fund that lends to financial institutions based in frontier markets. More details will be unveiled later in the year.

Client experience remains at the forefront of our business strategy, and this year, we will continue to engage our investors and portfolio companies to ensure a regular feedback loop which is crucial for us to improve our services.

Investments in infrastructure and human capital are also essential tools for us to get through the objectives and challenges of 2018. More than ever, we recognize the need for information to be at our clients’ fingertips. Our IT systems will be undergoing an upgrade in order to meet this requirement. Technical risk management will also be beefed up as part of our regulatory obligations and to counter the threat of cyber-security which is increasingly more prevalent. Being in the relationship business, our people remain another pillar of our success. We continue to train, promote and reward key personnel in order to keep the ship moving and in tip-top condition.

When we first started out, most of our borrowers were unwilling to disclose that they were funded by an alternative financier. And investors considered trade finance as an exotic asset class. Against all odds and after weathering through several economic crises, we now have seven private debt investment vehicles that connect our investors to businesses worldwide. In total, EFA has deployed US$9.5 billion of financing to these companies.  It just shows how far we’ve come, and the rising acceptance and awareness of the important role that EFA, as well as our peers, have in this space.

We look forward to continue our journey and in 2018, will endeavor to make even more meaningful differences into the lives of our stakeholders.

About EFA Group

EFA Group is a global independent asset manager specializing in private debt strategies. Established in 2003, the firm manages over US$1.2 billion of capital with a cumulative 25-year track record of positive performance across all of its funds. EFA is regulated by the Monetary Authority of Singapore, the Dubai Financial Services Authority and has over 60 personnel across offices in Singapore, Dubai, Geneva, London, and Istanbul. More information at www.efa-group.net

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UK might need negative rates if recovery disappoints – BoE’s Vlieghe

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UK might need negative rates if recovery disappoints - BoE's Vlieghe 1

By David Milliken and William Schomberg

LONDON (Reuters) – The Bank of England might need to cut interest rates below zero later this year or in 2022 if a recovery in the economy disappoints, especially if there is persistent unemployment, policymaker Gertjan Vlieghe said on Friday.

Vlieghe said he thought the likeliest scenario was that the economy would recover strongly as forecast by the central bank earlier this month, meaning a further loosening of monetary policy would not be needed.

Data published on Friday suggested the economy had stabilised after a new COVID-19 lockdown hit retailers last month, while businesses and consumers are hopeful a fast vaccination campaign will spur a recovery.

Vlieghe said in a speech published by the BoE that there was a risk of lasting job market weakness hurting wages and prices.

“In such a scenario, I judge more monetary stimulus would be appropriate, and I would favour a negative Bank Rate as the tool to implement the stimulus,” he said.

“The time to implement it would be whenever the data, or the balance of risks around it, suggest that the recovery is falling short of fully eliminating economic slack, which might be later this year or into next year,” he added.

Vlieghe’s comments are similar to those of fellow policymaker Michael Saunders, who said on Thursday negative rates could be the BoE’s best tool in future.

Earlier this month the BoE gave British financial institutions six months to get ready for the possible introduction of negative interest rates, though it stressed that no decision had been taken on whether to implement them.

Investors saw the move as reducing the likelihood of the BoE following other central banks and adopting negative rates.

Some senior BoE policymakers, such as Deputy Governor Dave Ramsden, believe that adding to the central bank’s 875 billion pounds ($1.22 trillion) of government bond purchases remains the best way of boosting the economy if needed.

Vlieghe underscored the scale of the hit to Britain’s economy and said it was clear the country was not experiencing a V-shaped recovery, adding it was more like “something between a swoosh-shaped recovery and a W-shaped recovery.”

“I want to emphasise how far we still have to travel in this recovery,” he said, adding that it was “highly uncertain” how much of the pent-up savings amassed by households during the lockdowns would be spent.

By contrast, last week the BoE’s chief economist, Andy Haldane, likened the economy to a “coiled spring.”

Vlieghe also warned against raising interest rates if the economy appeared to be outperforming expectations.

“It is perfectly possible that we have a short period of pent up demand, after which demand eases back again,” he said.

Higher interest rates were unlikely to be appropriate until 2023 or 2024, he said.

($1 = 0.7146 pounds)

(Reporting by David Milliken; Editing by William Schomberg)

 

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UK economy shows signs of stabilisation after new lockdown hit

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UK economy shows signs of stabilisation after new lockdown hit 2

By William Schomberg and David Milliken

LONDON (Reuters) – Britain’s economy has stabilised after a new COVID-19 lockdown last month hit retailers, and business and consumers are hopeful the vaccination campaign will spur a recovery, data showed on Friday.

The IHS Markit/CIPS flash composite Purchasing Managers’ Index, a survey of businesses, suggested the economy was barely shrinking in the first half of February as companies adjusted to the latest restrictions.

A separate survey of households showed consumers at their most confident since the pandemic began.

Britain’s economy had its biggest slump in 300 years in 2020, when it contracted by 10%, and will shrink by 4% in the first three months of 2021, the Bank of England predicts.

The central bank expects a strong subsequent recovery because of the COVID-19 vaccination programme – though policymaker Gertjan Vlieghe said in a speech on Friday that the BoE could need to cut interest rates below zero later this year if unemployment stayed high.

Prime Minister Boris Johnson is due on Monday to announce the next steps in England’s lockdown but has said any easing of restrictions will be gradual.

Official data for January underscored the impact of the latest lockdown on retailers.

Retail sales volumes slumped by 8.2% from December, a much bigger fall than the 2.5% decrease forecast in a Reuters poll of economists, and the second largest on record.

“The only good thing about the current lockdown is that it’s no way near as bad for the economy as the first one,” Paul Dales, an economist at Capital Economics, said.

The smaller fall in retail sales than last April’s 18% plunge reflected growth in online shopping.

BORROWING SURGE SLOWED IN JANUARY

There was some better news for finance minister Rishi Sunak as he prepares to announce Britain’s next annual budget on March 3.

Though public sector borrowing of 8.8 billion pounds ($12.3 billion) was the first January deficit in a decade, it was much less than the 24.5 billion pounds forecast in a Reuters poll.

That took borrowing since the start of the financial year in April to 270.6 billion pounds, reflecting a surge in spending and tax cuts ordered by Sunak.

The figure does not count losses on government-backed loans which could add 30 billion pounds to the shortfall this year, but the deficit is likely to be smaller than official forecasts, the Institute for Fiscal Studies think tank said.

Sunak is expected to extend a costly wage subsidy programme, at least for the hardest-hit sectors, but he said the time for a reckoning would come.

“It’s right that once our economy begins to recover, we should look to return the public finances to a more sustainable footing and I’ll always be honest with the British people about how we will do this,” he said.

Some economists expect higher taxes sooner rather than later.

“Big tax rises eventually will have to be announced, with 2022 likely to be the worst year, so that they will be far from voters’ minds by the time of the next general election in May 2024,” Samuel Tombs, at Pantheon Macroeconomics, said.

Public debt rose to 2.115 trillion pounds, or 97.9% of gross domestic product – a percentage not seen since the early 1960s.

The PMI survey and a separate measure of manufacturing from the Confederation of British Industry, showing factory orders suffering the smallest hit in a year, gave Sunak some cause for optimism.

IHS Markit’s chief business economist, Chris Williamson, said the improvement in business expectations suggested the economy was “poised for recovery.”

However the PMI survey showed factory output in February grew at its slowest rate in nine months. Many firms reported extra costs and disruption to supply chains from new post-Brexit barriers to trade with the European Union since Jan. 1.

Vlieghe warned against over-interpreting any early signs of growth. “It is perfectly possible that we have a short period of pent up demand, after which demand eases back again,” he said.

“We are experiencing something between a swoosh-shaped recovery and a W-shaped recovery. We are clearly not experiencing a V-shaped recovery.”

($1 = 0.7160 pounds)

(Editing by Angus MacSwan and Timothy Heritage)

 

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Oil extends losses as Texas prepares to ramp up output

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Oil extends losses as Texas prepares to ramp up output 3

By Devika Krishna Kumar

NEW YORK (Reuters) – Oil prices fell for a second day on Friday, retreating further from recent highs as Texas energy companies began preparations to restart oil and gas fields shuttered by freezing weather.

Brent crude futures were down 33 cents, or 0.5%, at $63.60 a barrel by 11:06 a.m. (1606 GMT) U.S. West Texas Intermediate (WTI) crude futures fell 60 cents, or 1%, to $59.92.

This week, both benchmarks had climbed to the highest in more than a year.

“Price pullback thus far appears corrective and is slight within the context of this month’s major upside price acceleration,” said Jim Ritterbusch, president of Ritterbusch and Associates.

Unusually cold weather in Texas and the Plains states curtailed up to 4 million barrels per day (bpd) of crude production and 21 billion cubic feet of natural gas, analysts estimated.

Texas refiners halted about a fifth of the nation’s oil processing amid power outages and severe cold.

Companies were expected to prepare for production restarts on Friday as electric power and water services slowly resume, sources said.

“While much of the selling relates to a gradual resumption of power in the Gulf coast region ahead of a significant temperature warmup, the magnitude of this week’s loss of supply may require further discounting given much uncertainty regarding the extent and possible duration of lost output,” Ritterbusch said.

Oil fell despite a surprise drop in U.S. crude stockpiles in the week to Feb. 12, before the big freeze. Inventories fell by 7.3 million barrels to 461.8 million barrels, their lowest since March, the Energy Information Administration reported on Thursday. [EIA/S]

The United States on Thursday said it was ready to talk to Iran about returning to a 2015 agreement that aimed to prevent Tehran from acquiring nuclear weapons. Still, analysts did not expect near-term reversal of sanctions on Iran that were imposed by the previous U.S. administration.

“This breakthrough increases the probability that we may see Iran returning to the oil market soon, although there is much to be discussed and a new deal will not be a carbon-copy of the 2015 nuclear deal,” said StoneX analyst Kevin Solomon.

(Additional reporting by Ahmad Ghaddar in London and Roslan Khasawneh in Singapore and Sonali Paul in Melbourne; Editing by Jason Neely, David Goodman and David Gregorio)

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