VPC Specialty Lending re-enters FTSE All-Share

ALTERNATIVE lending investment trust VPC Specialty Lending has been re-admitted into the FTSE All-Share Index, after being relegated in June over liquidity issues.

It was initially reported that the trust had failed the Index’s liquidity test last month, however a reanalysis of the liquidity data found that if it weren’t for a small reporting error from an OTC trading exchange, VPC would have passed the liquidity test. The trust will be officially reinstated to the FTSE All Share Index from Thursday 1 August.

Read more: Woodford offloads stakes in P2PGI and VPC

In early July, brokers at Numis added VPC Specialty Lending to its Recommended List, stating that the fund offered a value opportunity trading on an 18 per cent discount.

“We had not based our recommendation on the fund being incorrectly relegated from the FTSE All Share, but the anticipation of index selling had been a factor in the fund’s discount widening,” added Numis. “Counter-intuitively, VPC has re-rated since its relegation, although this is mainly due to the fund buying back c.5.8m shares at a cost of £4.07m around the date of the index adjustment.

“We would expect its re-entry to lead to the discount narrowing further from the current level of 15 per cent due to buying from tracker funds.”

Read more: VPC thrives as P2P wind down continues

VPC has been steadily increasing its NAV in recent months, despite some unexpected headwinds such as the sudden withdrawal of Neil Woodford’s 13 per cent stake in May.

The fund now has a market capitalisation of £249m, and it pays quarterly dividends at a rate of 8p per annum, equivalent to an 11 per cent yield for investors.

In 2016, VPC began to steer away from peer-to-peer investments in order to focus on balance sheet lending. Less than three per cent of its portfolio is currently exposed to the P2P market.

Read more: VPC Specialty Lending sees monthly NAV growth almost halve in May