Providence Investment Management has launched a closed-ended absolute return fund investing in the debt of small and medium-sized emerging market businesses.
The Providence Investment Funds PCC Limited aims to provide investors with returns of between 9.5% and 14.25% from investments in Brazilian debt, specifically the factoring of receivables (i.e. the purchase of debt) of small and medium-sized businesses in Brazil.
The fund lends money from Guernsey to the factoring company, based in Sao Paulo; the short-term debt, typically 30 to 180 days in tenure, is then purchased at a discount of more than 2% per month; the returns are collected at par which gives the returns to the investor in the closed-ended fund.
Its parent company has interests in financial services and factoring in Brazil - that recently overtook the UK as the world’s sixth largest economy - and other emerging markets and has offices in Brazil, the US, Guernsey and China.
The minimum initial investment is $50,000 (or euro, sterling and Swiss franc equivalent) and investors have the choice of an 18 or 36 month term. Income distribution is either monthly or quarterly.
Steve Dewsnip, a director of both Providence Investment Management International Limited and Fund Corporation of the Channel Islands Limited (the fund’s Guernsey administrator), commented: “Raising credit by way of factoring is a way of life in Brazil and, by Brazilian standards, a relatively inexpensive way of obtaining finance.”