VICTORY Park Capital Specialty Lending (VPC) saw its net asset value (NAV) total return decline for the first time in six months during May.
The investment trust’s latest monthly update shows a 0.62 per cent return before a 1.3 per cent capital decline from losses within the portfolio that pushed the NAV down 0.68 per cent.
The portfolio took a hit from a 15.2 per cent decline in the share price of US short-term credit provider Elevate, which saw the trust’s equity positions fall 0.32 per cent, while the remainder of its marketplace portfolio contributed a decline of 0.27 per cent.
The fund also suffered from losses on Avant securitisations, accounting for 0.66 per cent of the drop.
Balance sheet loans continued to perform strongly, with no credit losses, contributing monthly income of 0.7 per cent.
It is the first overall decline since November 2016, when a shift from marketplace to balance sheet loans was first introduced and takes the year-to-date performance to 0.78 per cent.
The results have prompted concerns from Numis about the focus on balance sheet lending.
“VPC continues to differentiate itself by focusing the portfolio on balance sheet loans, which the manager favours due to the protection of the platform taking the first loss,” an analyst note said.
“We have some concerns that the balance sheet approach can lead towards a bias towards platforms with higher risk/return loans, demonstrated by the average APR on one of its platforms being 47 per cent.
“In addition, the portfolio has higher exposure to the US consumer than most of its peers.
“The discount has narrowed to 11 per cent from a trough of around 25 per cent in late 2016, but we believe that the potential for further narrowing is limited unless the fund can build a record of more consistent NAV performance.”