VICTORY Park Capital Specialty Lending (VPC) saw its net asset value (NAV) return to growth in June as it continues to shift towards balance sheet investments.
The investment trust, which invests in peer-to-peer platforms and alternative finance providers, posted a NAV return of 0.04 per cent, recovering from a 0.68 per cent loss in May, made up of an income return 0.66 per cent and a capital loss of 0.62 per cent.
Balance sheet loans made up the majority of returns at 0.70 per cent while equity positions dragged the performance down by 0.52 per cent.
Over the second quarter, balance sheet loans have made up 7.05 per cent of returns, but other assets dropped, leaving its NAV over the three months down 0.58 per cent.
Since the end of June the company has sold further equity stakes and seen its balance sheet investment allocation reach 70 per cent, according to the VSL monthly update.
This compares with 49 per cent at the end of May.
It now has investments in debt instruments of 27 portfolio companies, of which 22 are balance sheet investments. In addition it has equity stakes in 21 companies.
However, analysts are still unsure of this approach.
“The manager expects income to pick up as it continues to reallocate the portfolio towards balance sheet loans,” a Numis research note said.
“It favours these positions due to the protection of the platform taking the first loss, although we caution that this 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.”
The investment trust is currently trading at a discount to NAV of 13.2 per cent.