VICTORY Park Capital will start using 20 per cent of its monthly management fees to purchase the fund’s shares while they are trading at a discount, in order to bolster confidence during “challenging” market conditions.
The peer-to-peer focused investment trust said in its half-year results on Thursday that a number of its holdings in securitisations suffered writedowns and that certain positions in its loan portfolios exhibited higher-than-expected losses.
It is thought that the fund’s management sees the Brexit vote and subsequent weakening of the pound as the most powerful headwind on performance, as the firm has to keep taking cash out to cover its hedged positions.
Shares were trading at a 15 per cent discount to net asset value as of 30 June 2016.
“Using management fees to purchase the fund’s shares is quite a strange arrangement – not unheard of but not common,” a City analyst who covers the sector told Peer-to-Peer Finance News.
“It’s an olive branch to shareholders.”
During the first half of the year, the company delivered a total net asset value return of 1.5 per cent, compared to 5.8 per cent at the end of 2015.
“The company has taken steps to mitigate the credit underperformance by exiting and winding down certain positions and redeploying capital to other, better performing opportunities,” said chairman Andrew Adcock.
“In particular, I am excited about the strong pipeline of investments in proprietary balance sheet facilities, which offer significant credit enhancements, and feature attractive interest rates ranging from 12 per cent to 16 per cent.”