VICTORY Park Capital (VPC) Specialty Lending Investments saw net returns fall by 1.47 per cent during the fourth quarter of 2016, due to its underperforming peer-to-peer loan portfolio.
The London-listed fund, which makes P2P and balance sheet investments, posted a net revenue return of 1.67 per cent over the last three months of the year. However, this was offset by a net capital return of -3.14 per cent, equating to a net total return of -1.47 per cent.
“The performance of the company’s investment portfolio remained sharply polarised in the fourth quarter of 2016, with strong balance sheet investment returns contrasting with weak marketplace returns,” it said in a stock exchange announcement.
The fund has previously announced that it is winding down its P2P portfolio, after losses triggered substantial writedowns last October.
It has invested in a wide range of online lenders worldwide, including UK firms Assetz Capital and Funding Circle and US platforms Prosper and LoanMart. However, it has since sold off its Funding Circle UK loan portfolio and refinanced its Prosper portfolio.
It has also been hit by losses from securitised loans through US platform Avant.
Read more: US P2P vs UK P2P: A Tale of Two Countries
“During the fourth quarter of 2016, there has been further progress in the reallocation of capital to balance sheet investments,” the fund said. “By the end of the fourth quarter of 2016, balance sheet investments accounted for 51 per cent of net asset value (NAV) up from 47 per cent at the end of the third quarter of 2016 and 22 per cent at the beginning of the year, illustrating the significant capital reallocation that has taken place.
“The exposure to marketplace loans and securitisation residuals has correspondingly decreased, accounting for 31 per cent of NAV at the year end, down from 40 per cent at the end of the third quarter of 2016 and 58 per cent at the beginning of the year. We expect this reallocation process to continue and, over time, to drive higher returns for the company.”
VPC is moving more of its capital into balance sheet investments, as they typically offer higher returns with less leverage. Last November, the fund said that it had streamlined its whole loans portfolio to focus more on balance sheet lending.
VPC announced a share buyback programme last December, to address the disparity between the company’s share price and its NAV per share. It had repurchased 1.5 million shares at an average price of 77.25p by the end of the year.
It continues to buy back shares, using 20 per cent of VPC’s monthly management fee, in response to challenging market conditions caused by the weak pound.