P2P Global Investments (P2PGI) capped off a tumultuous 2017 with a boost to its net asset value (NAV) during December.
P2PGI, the first investment trust to back peer-to-peer loans, went through a management merger and shifted its strategy towards secured assets during 2017, helping it reach a record monthly NAV return at the end of the year.
Its NAV was 0.55 per cent, matching its highest return over the 12 months during March and took its annual return to 3.03 per cent.
This is still behind its target of six to eight per cent but P2PGI has said it believes share buybacks and its strategy shift towards secured assets will help boost returns.
During the quarter, the London-listed fund said it increased allocation to secured assets, including UK and Irish real estate and to small business lending in both the US and UK, while unsecured consumer lending now makes up 42.7 per cent of the portfolio compare with 55.6 per cent in June 2017.
P2PGI said it has a £400m pipeline of new opportunities.
“The investment manager continues to see exciting opportunities within non-bank specialist lending niches,” a quarterly update from the investment trust said on Monday.
“Having seen significant growth of unsecured consumer loan origination in 2015 and 2016, the investment manager now sees increased opportunity in high quality small business and secured lending.
“The investment manager aims to decrease the allocation to unsecured mainstream consumer lending globally and increase exposure to small business loans, secured and specialist assets that offer higher risk adjusted margins.”
The company also revealed that new IFRS 9 accountancy standards, mandating trusts to take account of possible loan defaults when calculating portfolio values, would hit its NAV by 2.5-3 per cent.
Analysts seemed satisfied with the results.
“P2P GI is currently trading at a 17.8 per cent discount to the December NAV, or 15.5 per cent adjusted for the IFRS 9 provision,” a Numis analyst note said.
“Whilst there will be a hit to NAV next month, we believe the discount has scope to narrow if the fund can deliver improved returns.
“The downside to the discount is limited through buybacks, and £10.3m, 1.6 per cent of share capital, has been purchased since the start of December 2017 when the board initiated a more aggressive buyback.”
P2PGI saw its manager MW Eaglewood merge with Pollen Street Capital in November.
It said at the time that it will continue repositioning to specialist and secured assets with a higher risk-adjusted return and will accelerate the reduction in exposure to US consumer loans.