“Importantly, this [artificially low interest rates] distorts the behavior of economic and market participants. It causes things to be built that otherwise wouldn’t have been built, investments to be made that otherwise wouldn’t have been made, and risks to be borne that otherwise wouldn’t have been accepted.”
— Howard Marks
Our heartfelt prayers go out to all innocent lives lost in the Israel/Palestine conflict.
Recently, we saw record turnouts in the Polish elections as Poles charted a new future for their country. The future they chose seems to move away from the nationalistic and populist policies of Prawo i Sprawiedliwość (PiS) and towards a more pluralist government with a less reproachful relationship with the EU. The PiS still won the most votes (35.4%) but they do not hold enough votes to form a majority government. Unless the PiS forms a coalition government with opposition parties, which seems highly unlikely, the next government is going to be made up of three opposition groups led by Donald Tusks’ Civic Coalition. This has raised the hopes of Poles and leaders across the EU, that the country may finally end its adversarial attitude towards the EU and reverse some of the damage done by PiS to state institutions, especially in terms of the judiciary.
All our partners in Poland view this development as very positive. They expect a return to a more market friendly approach and with the return of EU funding, they expect an improvement in revenue growth for SMEs which in turn would lead to more demand for factoring.
In other macroeconomic developments, it seems increasingly clear that we have come to the end of the hiking cycle with the FED and BoE holding steady and the last 25bps hike coming from the ECB in September this year. Interestingly, the increased short-term interest rates are finally feeding through to the longer end of the curve with the US 30-year treasury yield increasing to 16-year highs. It seems that markets have finally come to believe the FED’s message of “higher for longer” and are no longer pricing in quick rate cuts to come in the near future.
We view this as broadly positive for credit portfolios in general and our portfolio in particular. An elevated interest rate level, or returning to historic norms depending on the point of view, is likely to lead to a more discerning approach to risk and more appropriate yields across the credit market. Our partners have already adjusted to the higher interest rate environment without a significant uptick in risk and should higher interest rates persist, we expect that it will lead to more favorable risk adjusted returns across our portfolio in the coming years.
In AGC news, October is generally conference month in the world of impact and our Co-CEO, Sudha, has been out on the circuit:
- She attended the 2X Global Annual Members’ meeting in Luxembourg, where she partnered with Amanda Satterly of Asian Development Bank (ADB) and Stella McLeod McKenna of 2X Global to present a compelling discussion on opportunities for members to explore ways to strengthen financially inclusive processes.
- She also attended the recent GIIN Investor Forum in Copenhagen where world challenges for impact investing were underscored and how the demand for transparency and SFDR create pathways to measuring impact.
- She was at the 100 Women Impact Investing Symposium in New York. The sold-out event hosted 250 delegates with 18 table talks and 45 speakers that facilitated discussions such as ‘’The Recipe and Kitchen behind Gender Lens Investing’’ and keynote speakers such as the Founder and CEO of RockCreek, Afsaneh Beschloss.
- Most recently, Sudha and Hendrik attended the Apex Invest London event where Sudha joined the Opportunities in Private Credit panel to discuss the future of private credit and opportunities within the financial landscape. Keynote speaker, Deborah Meaden of Dragons Den, also attended highlighting further emphasis on the necessity for ESG and impact in the investing space.
- And for the week of October 23rd, she is at Socap in San Francisco.
Earlier this year in June, we published our sixth annual impact report underscoring the importance of solid evidence to comprehend the full extent of our investments’ financial and social impact. This month we are publishing further insights which aims to specifically highlight one of our pillars – our commitment to gender equity.
At the heart of AGC is staying true to our mission of providing liquidity to SMEs, particularly those that are women owned or women led. Please contact Sudha Bharadia, Co-CEO at email@example.com for further information.