HONEYCOMB is banking on the continuing retrenchment of mainstream lenders from consumer credit markets to boost its success.
The alternative finance-focused investment trust posted net asset value (NAV) total returns of 9.11 per cent in 2017, helped by the gap in the market left by mainstream banks.
“We believe that the retrenchment of mainstream lenders from specialist markets continues to present an opportunity to engage with customers in markets which are underserved by traditional lenders and platforms,” Robert Sharpe, chairman of Honeycomb, said in the fund’s 2017 annual report, released on Monday.
“We further believe that through our differentiated approach and by targeting verticals that require specialist understanding, more detailed underwriting, or which pre-select higher quality borrowers, attractive risk-adjusted returns can be delivered with low volatility throughout the cycle.”
Sharpe said the investment trust, which backs alternative lenders such as Iwoca and the Green Deal Finance Company, was monitoring the political and economic uncertainty created by Brexit as well as the end of the term funding scheme (TFS), which provided cheap wholesale funding for banks.
He warned that while the end of the TFS would not directly hit the fund, it may have some impact on the overall liquidity and competitive dynamics in the market, adding that opportunities as well as risks may exist.
Honeycomb is currently trading on a premium to NAV of 11 per cent.
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