Equity Returns for Bond-Like Risks
Profit participating notes, or PPNs, are securities that generate excellent income without unacceptably high risk. PPNs are issued in a listed, bond-like format that generate profits from a specified business activity of an investee company. Because the returns are linked to a real economic activity or trade, investors can typically earn 10-16% per annum in income.
Although investor capital is at risk, it’s not as risky as buying the shares of a company due to strong capital controls and other risk mitigation measures, similar in nature to those found in bond, trade finance and supply chain financing.
PPNs don’t invest in early-stage companies or finance speculative activities. We are not a VC or PE firm and we don’t invest in a company’s shares. Instead, we identify exceptional, mature companies with high quality, consistent profitability, and focus on a specific trade activity within each company.
Our extensive due diligence forensically validates the following:
- Profitable and consistent trading record
- Strong management
- Audited accounts
- World-class operations
- Watertight internal governance processes
PPNs are directly linked to an underlying hard commodity asset or trade activity. The investor earns profits from a specific trade, calculated according to a pre-agreed formula.
Investor money is used for something “real,” such as purchasing raw materials for processing in a factory.
The performance of the PPN is audited on an ongoing basis until maturity.
How PPNs Work: Real Assets, Real Profits
We link PPNs directly to an underlying hard commodity asset or trade activity.
- Linked to Real Assets: PPNs are tied to specific hard commodity assets or trade activities, like purchasing raw materials for factory processing. Your investment supports real-world economic activities, making it tangible and purposeful.
- Profit Calculation: Profits are calculated using a pre-agreed formula based on the performance of the specific trade. This ensures transparency and predictability for investors.
- Ongoing Audits: We continuously audit the performance of PPNs until maturity, ensuring accountability and trust.
- Shari'a Compliant & Exchange-Listed: PPNs are structured using the mudaraba model, making them fully Shari'a compliant.They are listed on international exchanges, providing liquidity and transparency.
- Upside with Risk Controls: Unlike traditional sukuk, PPNs allow investors to participate in upside potential while maintaining tight, bond-like risk controls.
PPNs for Medium-Sized Companies
- Have the restrictions of bank debt
- Dilute equity
- Have the usual high costs of listing on an exchange
They therefore address a multi-trillion dollar gap in the market.
PPNs for Medium-Sized Companies
- Have the restrictions of bank debt
- Dilute equity
- Have the usual high costs of listing on an exchange
They therefore address a multi-trillion dollar gap in the market.
PPNs are not shares in a company...
- So although it’s not a “guaranteed” instrument (your capital is still at risk), the capital controls built into a PPN provide a type of protection that de-risks the investment, such as a target 100% cash collection rate to ensure principal is returned to investors in full at maturity.
- That’s why we describe it as “equity returns for bond-like risks”. For investors, PPNs address a gap in demand that is unfulfilled by traditional sukuk or equities.
Who Can Invest in PPNs?
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