VICTORY Park Capital (VPC) Specialty Lending Investments has reported that gross revenue return from its balance sheet investments hit an all-time high in January.
The alternative finance-focused investment trust has been ramping up its balance sheet investments since late 2016, when it announced that it was winding down its underperforming marketplace lending portfolio.
Its balance sheet loans produced returns of 1.08 per cent in January, compared to its marketplace loans which produced 0.04 per cent.
80 per cent of its portfolio was in balance sheet loans as of 31 January, the company said.
VPC, which recently sold down its investment in the US marketplace lending platform Prosper, revealed that its marketplace loan exposure is now just three per cent of its portfolio, as of 31 January.
The London-listed trust also reported that monthly net revenue increased to 0.99 per cent, the second-highest monthly figure recorded since the fund launched in 2015.
Taking into account capital returns of -0.57 per cent, this would have equated to a net return of 0.42 per cent.
Read more: VPC’s portfolio sales drag on performance
But the new IFRS accountancy rules, which have to take account of potential bad debts in the portfolio, mean that capital returns were -2.27 per cent and the net return was -1.28 per cent.
Around 73 per cent of this impact is related to reserves against VPC’s investment in UK online secured lender Borro.
VPC increased its stake in Borro to 49 per cent last November, with the remaining 51 per cent owned by other vehicles managed by VPC. As part of the new investment, VPC partners Tom Welch and Gordon Watson joined Borro’s board of directors.
“Given Borro’s recent reorganisation, the investment manager felt it was prudent to provide for forward-looking impairments in a stress scenario,” said VPC. “Borro has continued to make progress under its new chief executive, John Allbrook, and the investment manager continues to be optimistic about the long-term prospects for the business.”
81 per cent of VPC’s investments are in the US and seven per cent are in the UK. 82 per cent of its portfolio is in consumer loans and 18 per cent is in small- and medium-sized enterprise loans.