VPC Specialty Lending shrugs off Woodford sale with record quarterly NAV
Victory Park Capital (VPC) Specialty Lending, which saw Neil Woodford offload his entire stake at the end of April, has said that significant investor fund redemptions over the second quarter were “unrelated to the fundamental performance of the company”.
The alternative finance-focused fund reported a record quarterly net asset value (NAV) return of 3.97 per cent during the second quarter of 2019, while capital returns were 1.56 per cent, “driven by strong performance in the equity portfolio and the company’s share buy-back programme”.
At the end of April, former star stockpicker Neil Woodford fully divested his investment fund’s 16.6 per cent share in VPC, worth £49m, as he was under pressure to sell off more liquid investments to meet rising requests for customer redemptions.
VPC said on Wednesday that investor fund redemptions during the quarter had created an opportunity in terms of share buybacks.
“There were significant trading volumes during the quarter, caused by events we believe to be unrelated to the fundamental performance of the company – e.g. investor fund redemptions
and index changes,” VPC said in a quarterly update.
“These presented a unique opportunity to buy back shares in sizeable amounts.”
VPC bought back 24,559,023 shares over the quarter, representing 6.42 per cent of the company’s issued shares at an average price of around 70p per share. It said it funded these buybacks with excess cash and its CapitalSource credit facility.
“Given the low cost of financing relative to the effective yield of our portfolio, and the overall moderate leverage of the company, we feel this was an extremely attractive investment for the company’s shareholders,” it said.
“The board has asked the company’s broker to adjust the buyback approach to be a more consistent buyer of shares in smaller amounts, but we and the board will also continue to evaluate block share purchases when they become available.”
VPC has been moving away from peer-to-peer lending and towards balance sheet investments in order to boost returns.
VPC said it was pleased with the company’s performance and continues to believe that the company’s shares – which are trading at a significant discount to NAV – are “materially undervalued”. It said it is “confident that the market will eventually recognise the company’s progress”.