THE SHIFT away from peer-to-peer investments by some alternative lending-focused investment trusts is having mixed results.
Over the past year, P2P Global Investments (P2PGI), VPC Specialty Lending Investments and Ranger Direct Lending (RDL) have moved away from pure P2P to boost returns and narrow their discounts, while the Funding Circle SME Income Fund (FCIF) has remained true to its roots, all with varying outcomes.
The FCIF investment trust solely backs loans originated via the Funding Circle platform and saw its net asset value (NAV) return 6.9 per cent last year, while trading on a healthy premium.
In comparison, RDL – which has recently announced its intention to close – returned 5.4 per cent, VPC – which has shifted from P2P towards balance sheet lenders – saw its NAV total return grow by 3.07 per cent, while P2PGI – which last year merged its manager MW Eaglewood with Pollen Street Capital and is focusing more on asset-backed alternative lenders – reported a NAV return of 3.03 per cent during 2017. RDL and P2PGI are both trading at double-digit discounts to NAV.
“Funding Circle gets a premium because it has a strong brand name and reputation and has been able to have a clear focus on its goal and grow the NAV at steady pace,” said Adrian Lowcock, investment manager at wealth management firm Architas. “Interestingly, there seems to be a shift from pure P2P plays in the investment trust world to a mixed portfolio including secured loans.
“This shift is being received with mixed results – RDL’s move looks to have resulted in a boardroom battle and has been caught up in some problematic loans which has hit the fund.
“However, P2PGI seems to have a clearer strategy and mandate in order to meet its return objectives earlier. This feels like it is looking to reduce the risks involved as well as broaden the appeal of the fund.”