POLLEN STREET Capital is to take a controlling stake in MW Eaglewood, creating one of Europe’s largest alternative finance-focused investment managers, with assets of around £2bn.
Pollen Street, which manages the Honeycomb Investment Trust, will become the majority shareholder of the combined group, with MW Eaglewood backer Marshall Wace retaining a substantial holding, the two companies said on Wednesday.
The deal comes at a challenging time for MW Eaglewood, which has been facing pressure from the board of the fund it manages, P2P Global Investments (P2PGI), in the face of lacklustre returns and a continuing low share price. P2PGI’s board undertook a review of the investment management arrangements and has approved the proposed deal.
Lindsey McMurray, managing partner of Pollen Street, will be heading up the combined entity. Simon Champ, chief executive of MW Eaglewood Europe, will be staying on but his job title is unconfirmed, a spokesperson for P2PGI said.
“The board of P2PGI challenged us to come up with a strategic solution for the management of the trust and to enhance returns,” said Ian Wace, chief executive of hedge fund giant Marshall Wace.
“We accepted their challenge and the result is an outcome which is truly transformative, creating a major new industry player with deep and market leading capability in specialist credit.”
P2PGI said that the proposed deal includes implementing a “revised, more flexible investment strategy”, which will include “progressively transitioning the portfolio into more attractive specialist assets”.
The portfolio will have greater exposure to sterling-denominated assets and maintain exposure to “a tighter group of marketplace lending platforms”.
P2PGI, the first fund to buy exclusively into assets issued by P2P platforms, had already been tweaking its investment strategy to boost returns. It has been selling down its US consumer loan portfolio and shifting its exposure towards UK consumer, SME, trade and asset-backed loans, although this was not enough to bring its performance up to the target return level of six to eight per cent.
It posted a 0.55 per cent increase in net asset value in March, bringing its first-quarter growth to 1.17 per cent.
Boosting performance up to the target level may take up to 18 months to achieve, P2PGI said.
“Since the inception of P2PGI in June 2014 the market opportunity and structure for non-bank lending has changed immeasurably,” said Champ.
“The combination of MW Eaglewood and Pollen Street gives the manager an unparalleled breadth of skill-set and origination sources. We strongly believe the merger uniquely equips the manager for the future evolution of the industry.”
“The combination of Pollen Street and MW Eaglewood is a very strong investment management entity, bringing deep capability in investment management, risk, compliance, analytics, technology and origination of both to the management of P2PGI and to the emerging opportunities across the specialist lending industry,” said McMurray.
“We are looking forward to working together and executing both the merger and a revised, more flexible mandate.”
The deal is expected to be completed later this year subject to regulatory approvals.
Honeycomb Investment Trust’s share price was 1.1 per cent higher at 1115p at 11.20 GMT, while P2PGI was trading 1.09 per cent higher at 883p.