Hadrian’s Wall Secure Investments (HWSI) is likely to become the latest alternative finance-focused investment trust to shut down.
The fund launched a strategic review in December and has concluded the best option is to close.
Investors will be invited to vote on the closure at an extraordinary general meeting and if approved the investment company will be “put into managed wind-down with cash returned to shareholders in a timely and efficient manner,” HWSI said in a stock market update.
The company would be renamed the HWSI Realisation Fund and returns may comprise dividends, capital distributions and share buy backs or any combination of these.
HWSI would join other direct lending funds such as Ranger Direct Lending and the Funding Circle SME Income Fund in deciding to wind down, while others in the sector have shifted focus from marketplace lending to secured assets and balance sheet finance.
Brokerage Numis said in an analyst note that it was not surprised by the move.
“The fund is small and has lost faith of investors following significant increases to loss provisions in recent months due to issues in the underlying loans,” Numis said.
“Reflecting this, the fund’s discount has widened out to around 40 per cent.
“The hit to sentiment has been compounded by limited disclosure, with the private nature of debt meaning that names of investments are not disclosed, and there is limited information about risk metrics either regarding individual investments or on an aggregated portfolio basis.
“The amortisation schedule is useful information now that the company looks set to commence a managed wind-down, which implies that investors should receive the bulk of their capital back by mid-2022, with the final maturity in the portfolio in 2023.
“This does not consider any further potential portfolio issues or potential portfolio sales, although achieving an acceptable price on portfolio sales may be difficult to achieve.”