Frequently Asked Questions and Answers
What type of investment is Argyle Funds SPC Inc.?
What do Investors realise from their investment?
How do the Funds work?
Why is the Argyle Funds’ strategy successful?
What is Factoring?
How safe is the Investment? Is the Fund regulated?
What distinguishes Argyle from most mutual funds?
How has the Fund performed?
Who is eligible for investment in Argyle?
What is the minimum initial investment amount in the Fund?
Can Investors redeem their investment?
What is the management fee of the Fund?
What expenses does the Fund have to meet?
What other costs may Investors incur?
Are there tax implications related to investment in the Fund?
Does the Fund utilize leverage in its investing activities?
Is Argyle involved in speculative trading?
How do Stock Market fluctuations affect the Funds?
What impact has turmoil in the global financial markets had on the Funds?
What are the Principal Protection features of the Funds?
What is credit insurance?
On what criteria are Credit Advisors approved?
What types of industries are represented among the Credit Advisors’ clients?
Is factoring an expensive alternative to traditional financing arrangements?
How big is the factoring market?
Argyle Funds SPC Inc. (“Argyle” or the “Fund”) is a mutual fund structured as a Cayman Islands Segregated Portfolio Company. The Fund acts in a manner similar to a high-yielding government bond and has the same attributes as a fixed income instrument in that it has a specific maturity and a fixed interest rate. The Fund invests in pools of managed accounts receivable notes. Argyle offers investment in the following currencies: US Dollar, Canadian Dollar, Pound Sterling and Euro and these investments are available in 3 and 5 year maturities, as specified. Investors are welcome to reinvest for additional terms after maturity if they so desire.
What do Investors realise from their investment?
Argyle is an income producing product yielding returns in three different currencies commensurate with the investment term. This allows Investors to choose one investment of their liking or diversify their Argyle investments by layering currency, investment term and subsequent return. Interest is calculated daily and payable quarterly, unless specified otherwise. Although this target interest rate may be subject to change for any new investments, the rate at the subscription date is expected to be maintained for the duration of the term of the investment. At maturity of the term, the Fund expects to return the face value of investment.
How do the Funds work?
Argyle lends funds for a fixed interest rate and term to Factoring Companies or “Credit Advisors”, whose principal business activity is secured lending and factoring accounts receivable. Credit Advisors, in turn, finance viable companies that are seeking to fund their operations and expand their business activities.
Why is the Argyle Funds’ strategy successful?
Credit Advisors access funding from Argyle and are able to deploy these funds in their accounts receivable factoring activities and generate a significant profit margin after the cost of the Argyle funding. Argyle accesses the professional skills of the Credit Advisors to find and administer high quality factoring opportunities while remaining fully collateralized. This allows Argyle to pay out highly attractive interest rate to Investors.
What is Factoring?
A financial transaction whereby a business sells its commercial accounts receivable by way of invoices to a third party (the Factor or Credit Advisor) at a discount in exchange for immediate cash (i.e. working capital) with which to finance ongoing business. As soon as the business completes delivery of goods or services its cash flow improves by immediate receipt of cash (upon approval) by forwarding the invoice for funding to the Credit Advisor.
How safe is the Investment? Is the Fund regulated?
Argyle Funds SPC Inc. is a Segregated Portfolio Company domiciled in the Cayman Islands and is regulated by the Cayman Islands Monetary Authority. The Segregated Portfolio Company structure eliminates the potential for cross class liability risk therefore, liability in one class, if any, is limited to that class without exposing the assets of any other class in the Fund. The Funds are maintained with separate and independent Custodian, Banker, Fund Administrator and Investment Manager. All funds flow between the accounts held at the Banker and the investor without exception.
What distinguishes Argyle from most mutual funds?
Commonly, mutual funds have a fluctuating Net Asset Value (“NAV”) which reflects the relative success of the funds overall appreciation. Argyle is designed to distribute all gains achieved through ongoing interest payments to Investors. As a result, Argyle maintains a static NAV and therefore, the full subscription amount is returned to investors at maturity. Investors will enjoy monthly or quarterly interest payments (depending on which Class of Argyle is subscribed for) which aim to deliver a fixed and stated rate of return.
How has the Fund performed?
To date, the Fund has paid out their stated interest payment each month/quarter and all maturities/redemptions have also been paid as required. Also, to date, there has not been a claim on any credit insurance policy.
Who is eligible for investment in Argyle?
Argyle Fund investors are limited to persons with the knowledge and financial capacity necessary to invest in investments having the risks and objectives of the Funds. Prospective investors should familiarize themselves with the legal requirements within their own country for investment in the Argyle Funds and any other considerations relevant to such purchase. The Argyle Funds may not be subscribed for directly by “US Persons”. This restriction is detailed further in the Argyle Offering Memorandum.
What is the minimum initial investment amount in the Fund?
The minimum initial investment for each eligible investor is USD$50,000 or the equivalent in a different currency inclusive of any initial placement charges, if applicable. Subsequent investments may be made by existing Shareholders in increments of no less than USD$25,000 or the equivalent thereof in a different currency.
Can Investors redeem their investment?
As of January 2011, subscriptions in the Fund are redeemable at the option of the Investor subject to a redemption fee as set out in each Class’s Addendum.
What is the management fee of the Fund?
Each Argyle Fund Class pays the Investment Manager an annual management fee of 2.0%. The management fee is based on the Fund’s NAV on the Valuation Day of each month payable quarterly in arrears. This fee is taken from the investors’ quarterly interest payment instead of being deducted from the original investment amount so that the original investment continues to collect interest on the full investment amount. The stated interest payment target of each Argyle Class is quoted net of the management fee.
What expenses does the Fund have to meet?
Each Argyle Fund Class pays the Investment Manager the annual management fee of 2.0% and all other expenses of the Fund i.e. custodian, administrator, audit, legal and marketing are borne by the Investment Manager.
What other costs may Investors incur?
An Initial Placement Charge, from 0 to 4% of the subscription price, may be levied and payable by the Investors. The Initial Placement Charge is negotiated between the Investors and their Agent and this Charge shall be deducted from the Investors’ subscription price and paid to the Agent. Furthermore, any bank charges relating to the interest payments and return of capital at maturity or upon redemption, including wire charges, are at the Investors’ expense and will be deducted from the wire transfer amount.
Are there tax implications related to investment in the Fund?
Investors are subject to the tax laws of their respective jurisdictions and are advised to inform themselves accordingly as to (a) the legal requirements within their own country for the investment and (b) any foreign exchange restrictions to which they might be subject, and (c) the income and other taxation consequences, which might apply in their own country relevant to the investment. Prospective investors are encouraged to consult their own professional advisors as to the tax and legal consequences before investing.
Does the Fund utilize leverage in its investing activities?
No. The Fund’s capital structure is comprised of subscriber’s investment only. The Fund does not borrow from banks or insurance companies.
Is Argyle involved in speculative trading?
No. Funds are allocated solely to Credit Advisors who engage in secured lending activities to acquire third party insured or government account receivable assets.
How do Stock Market fluctuations affect the Funds?
The underlying assets of the Fund are not invested in equity or bond investments and are therefore not directly correlated to stock markets and the fluctuations that affect such investments. Argyle performs well in good and bad markets and sidesteps the consequences of economic downturns and turbulent world events.
What impact has turmoil in the global financial markets had on the Funds?
It is important to note that failures in financial markets and economic downturns, and the consequential imposition of stricter lending requirements by the banks, augur well for Argyle’s growth prospects which are bolstered by the heightened demand for factoring services as a sustainable financial solution. Factoring is generally a popular alternative to traditional bank financing as it accelerates/expedites access to financing. The attraction to the concept of factoring has historically increased during times of financial upheaval and/or crisis.
What are the Principal Protection features of the Funds?
The Fund reduces investment risk by the following principal protection features:
Receivables
The lending and collateral approval procedures by the Credit Advisors are extremely strict and all loans are secured by receivables, the value of which exceeds the value of the loan at all times, also called discounting. These receivables are then ultimately collateralized to the Fund.
Also arrangements between the Credit Advisor and their clients often allow the Credit Advisor the ability to exchange non-performing invoices for new, healthy receivables in the course of their on-going arrangement and written agreements.
Additional Collateralization
The Credit Advisors often take additional security from their clients to add to the receivables taken as collateralization to secure themselves further.
In addition to discounting, the Credit Advisors also maintain a reserve amount held back from each client, which is a percentage of invoice value. This allows the Credit Advisor to maintain a buffer to specifically deal with any potential invoice defaults so that the Credit Advisors cash flow is not affected.
Insurance
Accounts receivable are insured by credit insurance. In the unlikely event of default or non-payment of an invoice, the credit insurance coverage provides additional protection against loss to the Credit Advisor and hence, the Funds. Argyle is the named payee of this insurance.
Monitoring of Credit Advisor
The Investment Manager conducts intensive monitoring, research and analysis to ensure that the Credit Advisor’s profitability and cash flow are maintained at adequate levels. This is essential to confirm the Credit Advisors’ capacity to meet interest payments and maturity/redemption obligations.
What is credit insurance?
It is insurance to protect against the default of risk of a client of the Credit Advisor not settling their invoice obligation. Credit Advisors take other provisions for default of payment as well and the insurance is maintained as additional protection.
On what criteria are Credit Advisors approved?
Credit Advisors are subject to strict and rigorous due diligence and credit assessment which measures, among other things:
v Financial flexibility (financial strength, eligibility/ability to raise capital)
v Experience and depth of management (cash management practices, track record in respect of profitability and cash flow, history of steerage through economic downturn, ability to achieve targeted results, well-documented business model and supporting corporate strategy)
v Delinquency history
v Concentration of risk (customer and industry)
v Viability of business operations
v Presence of adequate Credit Insurance for accounts receivable
v Adequacy of technological support
What types of industries are represented among the Credit Advisors’ clients?
The portfolio of receivables is very well-diversified with exposure to a vast array of industries which is extremely useful in further mitigating the risk. Some of the many industries represented include manufacturing, wholesaling, construction, professional services, transportation and logistics and financial services. Investors may download the most recent Industry Breakdown of the Argyle portfolio from the Argyle website.
Is factoring an expensive alternative to traditional financing arrangements?
For a number of reasons, traditional financial solutions provided by commercial banks or equity investments could potentially be more costly. Factoring has quantitative and qualitative benefits including, but not limited to, the following:
v Expedites response to working capital needs to support business operations
v Enables accelerated expansion strategy which will arguably grow profitability and therefore pre-empts over-trading whereby debt becomes unmanageable and related carrying costs could potentially cripple business activity.
v Allows business to capitalise on lucrative opportunities in the marketplace without delay.
v Does not require principals of the business to forfeit stake holding interest, autonomy or future dividends.
v May qualify business for lower interest rate financing to fund other assets.
v The business’s balance sheet remains thinly leveraged, making it more attractive to banks for longer term financial solutions.
How big is the factoring market?
Factoring has shown notable growth in 2010. The first six months of 2011 demonstrated a perpetuated trend of expansion. Total turnover of the global factoring industry in 2010 reached nearly € 1.4 trillion reflecting a 20% increase over volumes recorded for 2009. These amounts represent the total value of receivables assigned to Factors. Furthermore, the growth of the factoring industry has been outperforming expansion of the world economy steadily during the last 30 years. By comparison, in 1980 total turnover was € 50 billion or less than 0.50% of world GDP compared to a penetration rate of almost 3.5% of world GDP in 2010.
Over 70% of world factoring turnover is concentrated in Europe, largely in the EU, with Asia expanding rapidly and holding world market share of some 8% in 2010. South America, North America and Australia/New Zealand followed closely behind recording market share of 6.3%, 4.2% and 3.3% respectively. The relatively low factoring turnover recorded in the US is explained by the evolution of receivables financing in North America into Asset Based Lending. The largest markets in 2010 were the UK/Ireland (17.0%), France (11.4%), Italy (10.7%), Germany (8.8%) and Japan (7.3%).
There are approximately 3,200 factoring companies (or banks with a specialised factoring division) that, at the end of 2010, financed an estimated € 164 billion to roughly 320,000 factoring clients. The Industry employs around 35,000 staff.
Factoring can provide companies with higher levels of financing than traditional cash flow lending arrangements and at the same time the industry has a proven track record of lower client losses attributable to specialist knowledge and heightened levels of scrutiny on the clients’ portfolio. There is generally a positive outlook for factoring among the Industry experts about growth potential in volumes, profitability and risk mitigation.