Honeycomb Investment Trust delivered net asset value (NAV) returns of 0.25 per cent in March, taking its annualised NAV to three per cent, despite a reduction in its portfolio size and an expected rise in requests for forbearance.
According to the investment manager, the returns in March included taking a management overlay of five per cent – or a £1.8m one-off increase to provisions – to reflect the economic uncertainty caused by the coronavirus pandemic.
Furthermore, the alternative finance-focussed fund’s portfolio value was reduced from £595m to £586m by the end of the month “through the contractual amortisation of the assets and reduced new origination.”
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By the end of March, the company had generated approximately £20m in cash, which will be “predominantly” used to reduce outstanding debt.
In a note to investors, the manager said that it has been monitoring the impact of coronavirus on the portfolio carefully and is tracking cash collections and forbearance statistics daily from both the whole loan portfolio and the underlying loan portfolios of its structured loan clients.
“The economic outlook has materially changed following the onset of the coronavirus disease crisis, so the company has updated its estimate of expected credit losses to allocate 100 per cent of the weight to the downside scenario,” said the manager.
“This scenario was set as a downside in the fourth quarter review of the impairment model and is broadly consistent with the economic outlook indicated by our third-party economic advisers.”
The manager added that consumer cash collections remained “robust” in March, with initial April figures also looking strong.
Meanwhile, between five and 10 per cent of customers have requested payment holidays or a temporary reduction in payments.
“A number of the borrowers have asked for temporary amendments to their facility to reflect the regulatory guidance on forbearance requests,” said the manager. “We are assessing these individually.”