P2P Global Investments (P2PGI) has warned that its legacy peer-to-peer lending portfolio continues to be more volatile than expected despite posting an improved net asset value (NAV) return for 2018.
P2PGI – the world’s first P2P-focused investment trust – revealed in its annual report that its NAV for 2018 was 5.2 per cent, up from three per cent in 2017.
The investment trust shifted its strategy from P2P to more specialist and asset-backed lending in 2017 but has warned that returns on its legacy portfolio, particularly consumer loans, have been lower than expected as it continues to run it down.
“Although the legacy portfolio continues to run off and has reduced from 48 per cent in December 2017 to 16 per cent at 31 December 2018, the returns on the portfolio have been lower than expected,” P2PGI said.
“This is driven predominately by the UK consumer portfolio where the overall net yield is significantly below target and has displayed monthly volatility throughout the year.
“The company is striving to improve the performance of these legacy assets and is optimising the run off. As part of this process, the company successfully sold two charged off portfolios of legacy consumer assets, a small low yielding consumer mortgage portfolio in May 2018 and a US consumer portfolio in December 2018.
“However, this legacy portfolio remains a drag on the company’s overall profitability and, whilst still material, its impact is reducing month on month and the manager continues to seek to improve performance and accelerate the run off through improving servicing and tactically disposing of loans where possible.”
More recent data from the investment trust in February blamed poor returns from its legacy Zopa portfolio for a lower NAV.
The investment trust is currently trading at a discount to NAV of 14.4 per cent.
Read more: Legacy portfolio weighs on P2PGI gains
“The fund has made significant progress in repositioning its portfolio and the legacy portfolio is having less impact as its exposure becomes less significant,” a Numis analyst note said.
“At 28 February, the continuing portfolio represented 87 per cent of assets.
“The key to narrowing the discount will be the manager delivering a consistently covered dividend fuelled by returns from the ongoing portfolio.”