HONEYCOMB investment trust expects new accounting standards to have a minimal impact on its net asset value.
New accountancy disclosures are being introduced for companies whose financial year began on or after 1 January 2018 and the alternative lending-focused investment trust is among the first to report how it will be affected.
The changes, based on IFRS 9 rules, mean funds valuing loans in their portfolio will need to include any expected credit losses in the calculation.
The Honeycomb financial year ended in December so it will need to take account of these changes when it reports its January performance.
The fund’s December monthly report gave some indication.
“The manager has made good progress with implementing IFRS 9 and results in the next newsletter will be reported using this accounting policy,” a stock market announcement said.
“Based upon September 2017 balances, the impact was less than one per cent NAV.”
The investment trust’s NAV ended the year with a 0.79 per cent monthly return, taking its performance for 2017 to 9.11 per cent, beating the 7.85 per cent reported for 2016.
Analysts at Numis said it was good to see funds showing the impact of the accountancy changes.
“It is good to see Honeycomb giving some guidance on the expected impact of IFRS 9 and we hope other funds follow suit, particularly funds that do not need to implement until later in the year,” a Numis analyst note said.
“The impact at less than one per cent of NAV is a bit lower than we were expecting given the fund’s target returns and a bias towards consumer loans, however, it is difficult to estimate because Honeycomb has limited portfolio disclosure and the estimation method is complex.
“It is difficult to assess the impact across the sector because each fund will be using a different methodology, calculating their expected losses based on their own internal metrics as well as monitoring a variety of external factors, which are likely to vary from fund-to-fund.”
Honeycomb’s investment manager, Pollen Street Capital, completed its acquisition of a controlling stake in MW Eaglewood last September, creating one of Europe’s biggest alternative finance-focused investment managers.
MW Eaglewood, which manages P2P Global Investments, has been renamed PSC Eaglewood.