Frontal Trust and FinTech Xepelin join forces to arrange an investment fund of invoices in Mexico

Diario Financiero / 12-05-2021

The investment vehicle seeks to raise US$ 44 million and expects to have called about half of that by August. They have already committed investments from family offices and an AGF

The financial boutique od Andrés Echeverría, Frontal Trust, continues to diversify its business. It is now setting up a public investment fund in Chile to finance the invoices operation in México of Xepelin, a Chilean FinTech linked to Sebastian Kreis and the former manager of alternative assets of BTG Pactual Nicolas de Camino. The target of the fund called ‘Frontal Trust Xepelin Deuda México’ is to raise US$ 44 million and in the first week of its opening, US$ 5 million were committed among investors close to the FinTech, whose contributions were allocated to the ‘founders’ series. Among these investors, there is an AGF and four Chilean family offices.

Now the second round of capital gathering begins, which aims to raise US$ 20 million, which they hope to achieve between May and August. Finally, there will be a third stage to raise the remaining US$ 20 million.

The expected return for this investment vehicle is 8.7% for contributions over US$ 1 million and 8.4% for those below that figure.

The aim is Mexico

The investment will be made through a trust in Mexico and, as explained by the portfolio manager of the frontal Trust fund, Andrés Gardeweg, “it will operate as a separate equity that will consolidate all the collection made of the invoices in Mexico to which Xepelin will not have access. This, because if Xepelin went bankrupt, the funds are protected inside Mexico, so it’s very safe.”

Differences between the invoice markets of Chile and Mexico would also play in favor of this fund. For example, once Xepelin buys an invoice from an SME, and then demand its payment from large companies, “we anticipate 80%. This is a difference from what happens in Chile, where we advance 98% of the payment to the SME, then there is 20% that remains supporting the investment of the contributors”, says FinTech partner Nicolas de Camino.

That difference is explained because in Chile there is more competition in that market. Xepelin loans are on average with a 90 days maturity, allowing investors to rescue 50% of their investment in 180 days or 100% in 360 days.

“In a context of low market rates, where many investors do not want to put their money on mutual funds with very low returns, here we set up an alternative fund, with a higher rate than fixed income, but with similar liquidity”, says Gardeweg.

Xepelin’s plans

Xepelin plans to expand to Colombia by the end of the year and, “if the presidential elections go well, it also to Peru”, says De Camino. For now, the agreement focuses on this invoice fund in Mexico, but “naturally, both sides seek long-term alliances, this is our first formal initiative together, and hopefully, this will result in the possibility to do several things together”, he added.

“We have done something that was not possible until now: to serve many SMEs simultaneously and to have alliances with some 40 companies. With some of them, we have managed to pay more than 500 of their suppliers in a month in advance. This is uncommon; banks, or any other FinTech, haven’t been able to do it, but we have the technology to do it”, said the Xepelin co-founder.

In just over two years they have lent some US$ 250 million to more than 2,700 clients.

For its part, Frontal Trust has more than US$ 1,170 million in assets under management and of that amount, 33% consists of private debt funds.

“We already have about four or five funds that handle private debt, associated with portfolios or invoices in Chile and Peru that give us experience in managing credit risk,” says Gardeweg.

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