P2PGI unveils new strategy that speeds up timetable for target returns
P2P GLOBAL Investments (P2PGI) has brought forward its timetable for reaching its target returns of six to eight per cent after unveiling its new portfolio strategy on Thursday morning.
The investment trust said it now expects to provide a dividend of at least 15p per quarter by the end of the second quarter of 2018, which analysts say reflects an annualised yield of 7.8 per cent.
The fund had previously expected to reach its target returns by the end of next year, but a strategy update, following the management merger between MW Eaglewood Europe and Pollen Street, has injected new confidence.
P2PGI has said it will continue repositioning to specialist and secured assets with a higher risk adjusted return and will accelerate the reduction in exposure to mainstream US consumer loans.
The update said the investment trust had equity holdings of five per cent, which includes some peer-to-peer platforms, that would take time to realise value and also revealed it has a pipeline of “attractive yielding assets” worth £400m.
The fund will also step up its share buybacks as part of efforts to reduce the discount to net asset value (NAV).
“To date the company has focused on P2P lending, which targets one specific approach to origination mainly in unsecured consumer and small business lending, which account for just 0.09 per cent of the UK’s total outstanding lending,” it said.
“We are now building strong partnerships with several hybrid originators, enabling access to a broader market with attractive yield opportunities.”
The update came as the investment trust reported a 1.3 per cent drop in NAV during October, attributed to its sale of US consumer loans.
The fund was trading at a discount to NAV of 22.4 per cent this morning.
Analysts at Numis described the strategy update as positive and highlighted that shares were up 3.3 per cent this morning to 793p, which represents a 19 per cent discount to the October NAV.
“Historic returns have certainly been disappointing for investors in P2PGI with NAV total returns of 4.4 each year since launch in May 2014,” a Numis analyst note said.
“The fund’s official target dividend at launch was six to eight per cent per year, however, we believe many investors had expectations of around 10 per cent returns.
“We see the potential for an improvement in returns going forward, with a significantly strengthened credit team and a realignment of the portfolio to take advantage of a wider set of non-bank lending.
“We believe that there is scope for the current discount to narrow given the support from the enhance buyback policy and the prospect of increasing returns in the near term.”