VPC Specialty Lending Investments has reported a total net asset value (NAV) return of 3.07 per cent for 2017 – below its target return levels.
The alternative finance-focused investment trust, which is managed by Victory Park Capital, said the underperformance was partly driven by one-time losses from portfolio sales.
The company has been shifting its portfolio away from peer-to-peer lending towards balance sheet assets, which now account for 79 per cent of its portfolio.
It recently revealed it had sold loans held with the US platform Prosper, thereby reducing its marketplace loan exposure to just 3.4 per cent of its portfolio.
VPC said: “Although our total return was not satisfactory, we feel that we have a strong portfolio that will drive higher returns in 2018. The marketplace loans and securitisations have proved to perform poorly, but we are proud to have successfully transitioned out of the majority of the portfolio’s marketplace loan facilities and into superior balance sheet investments.”
Towards the end of last year the company completed nine new balance sheet deals, bringing the number of balance sheet companies in its portfolio to 24.
VPC said it is taking a very cautious approach to credit given the long economic expansion in the US and a loosening corporate credit environment.
“While we have seen no immediate signs of credit stress across our portfolio, there are pockets of credit weakness in the broader economy,” it said. “Both prime credit cards and non-prime auto loans have recently displayed stress with rising delinquency rates and increased charge-offs.”
It added that a recent tax overhaul in the US should provide some relief to the consumer and wage growth.
The London-listed trust announced at the end of 2016 that it was winding down its underperforming marketplace lending portfolio, after losses triggered substantial writedowns.
VPC has investments in the US and UK and recently expanded its exposure to Mexico, Continental Europe, Kenya, Canada and Scandinavia.