Inflation, rate volatility and geopolitical shocks have pushed commodities back into focus for sophisticated investors. At the same time, traditional fixed income no longer offers the level of protection or real yield it once did.
Many professional, high net worth and institutional investors are asking a simple question: how can we use real assets to defend capital without taking on uncontrolled market risk.
One answer is commodity-backed loan notes. These structured instruments sit within private credit, not public markets. They use commodities and related contracts as security to support defined income streams. When designed correctly, they can provide inflation sensitivity, diversification and tangible protections for capital.
This article explains how commodity-backed loan notes work, how WIUS thinks about structuring them, and why they sit naturally alongside litigation-backed strategies in a diversified private credit allocation.
Why commodities are back on the agenda
Commodities have always played a role in institutional portfolios, but their importance has increased in recent years. The drivers are clear.
- Inflation has been more persistent than many policymakers expected.
- Supply chains have been disrupted by conflict, sanctions and climate events.
- Energy transition has created new demand for certain metals and resources.
For investors, commodities offer three attractive features.
- Inflation linkage
Many commodity prices respond directly to inflationary pressure and supply constraints. Exposure can help preserve purchasing power when cash and nominal bonds lose real value. - Diversification
Commodity price movements often differ from equity and bond markets. This can help smooth portfolio returns across cycles. - Real asset backing
Commodities are physical and measurable. That tangibility can be transformed into collateral, which is where structured strategies come in.
Buying commodities outright, or via listed futures, is not the only way to benefit from these features.
For many professional allocators, commodity-backed loan notes provide a more controlled and income-focused approach.
What are commodity-backed loan notes?
Commodity-backed loan notes are private credit instruments where investor capital is lent against commodity-related assets or cash flows. Returns come from interest on the loan, rather than speculation on price direction alone. The commodities, contracts or receivables act as collateral.
While structures vary, a typical commodity-backed note will have several common elements.
Underlying collateral
Collateral may include:
- Stockpiles of a specific commodity stored in recognised facilities.
- Receivables from offtake contracts with reputable buyers.
- Rights over inventory in transit or at designated storage points.
Collateral is usually documented, verifiable and subject to agreed controls.
Loan structure
Investors subscribe to a note which in turn funds one or more loans to a producer, trader or related entity. Key terms include:
- Maturity profile and repayment schedule.
- Interest rate and payment frequency.
- Loan-to-value parameters based on the underlying collateral.
- Covenants around minimum coverage, reporting and permitted actions.
Security and control
Security packages aim to give investors defined rights over the collateral and related cash flows. This may involve:
- Fixed or floating charges over stock and receivables.
- Control of collection accounts and escrow arrangements.
- Step-in rights if covenants are breached or collateral values fall.
The goal is to convert the economic value of commodities into a predictable lending structure, with capital protection anchored in real assets rather than unsecured promises.
How WIUS structures commodity-backed loan notes to protect capital
WIUS does not treat commodity-backed credit as a simple yield pick-up. The focus is on repeatable, disciplined structuring for professional investors. Our approach has several consistent features.
- Counterparty and collateral selection
The starting point is the party seeking finance and the nature of the commodity exposure. WIUS works with established partners and prefers situations where:
- The counterparty has a verifiable track record in the relevant commodity.
- Collateral is clearly identifiable, properly stored and easily monitored.
- Liquidity in the underlying market is sufficient to support enforcement if required.
We avoid situations where collateral quality is uncertain or dependent on opaque valuation methods.
- Conservative loan-to-value discipline
A central element of capital protection is conservative loan-to-value ratios. The loan is sized so that even after applying stress tests to commodity prices, the collateral coverage remains robust.
This is not about forecasting perfect entry points. It is about protecting downside by building a margin of safety between collateral value and outstanding principal.
- Security, escrow and cash flow control
Commodity-backed loan notes arranged through WIUS are structured to provide strong control over money flows. Typical features include:
- Security interests registered over inventory and receivables.
- Escrow accounts for sale proceeds and interest payments.
- Defined payment waterfalls that prioritise interest and principal to investors.
By controlling how cash enters and exits the structure, WIUS aims to limit leakage and reduce the scope for misuse of collateral.
- Legal and operational due diligence
Legal documentation is reviewed by specialist counsel, with focus on:
- Perfection and enforceability of security interests.
- Priority of claims over collateral.
- Local legal frameworks in storage and sale jurisdictions.
Operational processes are also assessed. This can include site visits, inspections of storage facilities and verification of inventory management systems.
More detail on WIUS’s due diligence philosophy can be found on our Investors page, which sets out how we review opportunities before they are introduced to our network.
- Ongoing monitoring and reporting
Once a commodity-backed note is live, monitoring is continuous, not occasional. WIUS expects regular reporting on:
- Collateral quantities and locations.
- Valuation updates based on market prices.
- Covenant compliance, including coverage ratios.
- Progress against repayment schedules.
Structured reporting allows investors to track performance and understand the health of the note over time.
Why commodity-backed loan notes complement litigation-backed strategies
WIUS is best known for litigation-backed opportunities. Commodity-backed loan notes are a natural complement rather than a competing focus.
Different risk drivers
- Litigation-backed notes derive returns from legal outcomes and enforcement. Their performance is largely uncorrelated with commodity prices, interest rates and equity markets.
- Commodity-backed loan notes are tied to physical assets and trade flows. Their risk profile is linked to counterparty performance, commodity markets and operational execution.
Combining both within a private credit allocation spreads exposure across distinct drivers.
Common structural principles
Despite different underlying assets, WIUS applies the same structural disciplines to both areas. These include:
- Clear collateral or proceeds backing.
- Independent legal review of security and enforcement.
- Cash flow control through escrow and defined waterfalls.
- Conservative assumptions in modelling and scenario analysis.
Investors benefit from familiarity with the WIUS approach even as they diversify across strategies.
Portfolio outcomes
In practice, litigation-backed and commodity-backed notes can sit alongside each other to create:
- Diversified sources of income that are less reliant on public markets.
- Exposure to real assets and legal claims with clear downside frameworks.
- A private credit allocation that is both defensive and opportunity driven.
Further context on our thinking around portfolio construction can be found on the Investment Solutions page, which explains how we design access for professional investors.
Where commodity-backed notes fit in a sophisticated portfolio
Commodity-backed loan notes are not a replacement for all fixed income or traditional alternatives. They are a targeted tool for professional allocators who:
- Have a medium-term horizon and can accept reduced liquidity.
- Want yield supported by identifiable assets rather than broad corporate credit.
- Value control over structure and enforcement pathways.
In many cases, they will sit within an alternatives or private credit bucket, complementing allocations to private equity, infrastructure and other real assets.
The allocation decision should be grounded in clear objectives.
For example:
- Enhancing income from the defensive side of the portfolio.
- Introducing inflation sensitive cash flows.
- Reducing reliance on public bond markets for protection.
WIUS works with advisers and institutional teams to fit these structures into wider portfolio frameworks, rather than treating them as stand-alone products.
Frequently asked questions about commodity-backed loan notes
1. Are commodity-backed loan notes the same as owning commodities directly?
No. Owning commodities directly, or through futures, is primarily an exposure to price movements. Commodity-backed loan notes are lending structures that use commodities or related receivables as collateral. Investors earn interest and principal repayments, not trading profits, although collateral values are an important part of risk management.
2. How do commodity-backed loan notes behave in periods of inflation?
There is no single outcome, but well-structured notes can provide some protection. Because collateral is linked to real assets that may respond to inflation and supply constraints, there is potential for coverage ratios to hold up better than nominal bond values. The loan terms and coverage levels are more important than inflation alone.
3. What are the main risks?
Key risks include:
- Falls in commodity prices that reduce collateral coverage.
- Operational failures in storage, logistics or documentation.
- Counterparty default or disputes over title.
WIUS focuses on mitigations, such as conservative loan-to-value ratios, high quality storage and documentation, and clearly enforceable security packages.
4. How liquid are these notes?
Commodity-backed loan notes are private instruments. They are typically intended to be held to maturity, with defined terms and repayment profiles. Secondary markets are limited. Investors should expect to commit capital for the full duration of the note and should view any interim liquidity as a possible benefit rather than an assumption.
5. Who are these opportunities suitable for?
These structures are intended for professional, high net worth, sophisticated and institutional investors who understand private markets and are comfortable with illiquidity, complexity and the need for detailed due diligence. They are not designed for retail investors or those requiring daily liquidity.
6. How can investors access WIUS opportunities?
Access is provided on a selective basis. Prospective investors are invited to review our materials and, where appropriate, complete onboarding steps that confirm eligibility. The most direct route is to contact the WIUS team to discuss current and upcoming opportunities that may fit your mandate.
Next steps – speak to WIUS directly about our current opportunities
Commodity-backed loan notes can offer yield, inflation sensitivity and diversification, backed by tangible assets and disciplined structuring. When combined with litigation-backed strategies, they help create a private credit allocation that is both defensive and differentiated.
For professional, high net worth and institutional investors who want exclusive access to this part of the market with institutional standards of governance and oversight, WIUS provides a focused route.
Contact WIUS today to discuss current commodity-backed and litigation-backed opportunities and how they may fit alongside your existing portfolio allocations.
You can reach our team via the Contact Us page to arrange a private consultation and request further information.
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You may find the following external resources useful for additional context on commodity trade finance structures and the expanding role of private credit in institutional portfolios.
Further Reading:
- GTR Review – Industry Perspectives: Bridging gaps in commodity finance (2025)
Overview of recent developments in commodity trade finance, including the growth of non-bank lenders, the use of technology for due diligence and monitoring, and the continued importance of structured, collateral backed solutions.
- BlackRock – Today’s private credit opportunity (October 2025)
Discusses why institutional investors are allocating more to private credit, emphasising diversification, the shift away from bank lending and the role of private credit as an income producing complement to traditional fixed income.
Disclaimer:
This content is for general information only and does not constitute investment advice or a recommendation. All investments involve risk, and your capital is at risk. Opportunities discussed are intended for professional, high net worth, sophisticated and institutional investors only. Private market investments can be illiquid and complex, and you could lose all invested capital.
Written by Mark Boyes
Co-Founder, WIUS Capital
With over 15 years of experience in international financial services, Mark has managed and advised on assets exceeding $100 million across five continents. He has held directorships at two leading international financial advisory firms and built a strong reputation for delivering results in competitive markets. At WIUS Capital, Mark focuses on structuring litigation-backed and asset-secured private credit opportunities for professional investors worldwide, alongside advising private companies on capital raising and sustainable growth. Known for his transparency and strategic mindset, he is committed to helping investors and businesses secure long-term results.
Meet the Founders https://wiuscapital.com/meet-the-founders/
