Funding Circle fund on track but warns of Brexit risks
FUNDING Circle’s listed fund performed in line with expectations in its first full year of operation, which saw its net asset value increase by 11 per cent to £164.8m.
The Funding Circle SME Income Fund, which is quoted on the main market of the London Stock Exchange, launched in November 2015 to give a wider range of investors access to the peer-to-peer platform’s loans.
In its annual report for the year to 31 March 2017, released on Friday, it said that investors received dividends of 6.5p per share over the last four quarters, in line with the target of 6-7p per share.
“Over its first full year of operation, the company’s performance has been pleasing and in line with expectations,” said the fund’s chairman Richard Boleat.
“We remain focused on providing investors with an attractive risk-adjusted return profile and consistent and sustainable dividend distributions.”
In April, the fund raised £142m via a share placing, to purchase investments originated by the Funding Circle platform and boost its working capital.
“[The fundraising] will provide expanded funding opportunities to SMEs in the UK, US and Continental Europe,” the annual report said.
UK credit asset exposure in the fund is slightly higher than initially expected at the time of the initial public offering, the fund said, due to the balance of Funding Circle originations during the first half of 2016.
The fund said that “changes in administration and political volatility in the company’s key markets” – namely the UK and the US – have not had a material impact on its portfolio or returns so far. However, it warned that politically-driven instability in the two countries will continue to be a consideration in the near-term at least.
“Such factors are highlighted in the board’s consideration of risk generally, and the board is particularly mindful of the risk posed to certain industry subsectors in the UK from the country’s ongoing process of withdrawal from the European Union,” it said.
“The board is also keeping a close eye on monetary policy and policy divergence in the company’s chosen markets, particularly the US, which have the potential to both increase portfolio returns over time, and also impact negatively on the costs of the company’s foreign exchange hedging programme.”
Funding Circle co-founder Samir Desai, who stepped down from the fund in May to focus on the P2P lending side of the business, has waived his remuneration, the annual report revealed.
Sachin Patel, who was appointed as a director on 18 May, also waived his fee.
The other four directors – Boleat, Frederic Hervouet, Jonathan Bridel and Richard Burwood – collectively pocketed £170,000 last year.