Kepler analysts have described the performance of Honeycomb Investment Trust as “extremely impressive” in a new piece of research on the alternative finance focused fund.
A review of the trust by research firm Kepler Trust Intelligence praised Honeycomb’s resilience during the Covid-19 crisis and highlighted the opportunities in the portfolio.
Honeycomb has continued to target an eight per cent yield from asset-backed lending by focusing on managing existing assets, deleveraging the portfolio and returning cash to shareholders through share buybacks.
Earlier this month, the investment trust said that it expects to return the value of its portfolio to £600m in the coming months, after falling to a low of £509m in August.
“The performance of [Honeycomb’s] portfolio since launch has been extremely impressive,” said Thomas McMahon, a senior investment trust analyst Kepler Trust Intelligence.
“The high yield has been consistently generated and NAV maintained, even through the current pandemic. Naturally, investors are likely to be wary of the immediate future. However, we think the indications from the portfolio are good so far.”
McMahon added that although some of the underlying loans went into forbearance in the second quarter of this year, the vast majority are performing once more.
“Importantly, the structure of the loans provides significant protection,” he said.
“We think the counter-intuitively defensive characteristics of the asset class might be missed by some. As much of the underlying portfolio is extremely short-dated, lenders are able to stop new lending and build up cash quickly. This, and the flexible gearing facilities, means the managers have the wherewithal to expand the portfolio once more.”
He added: “[Honeycomb] offers equity-like returns in income, should it navigate the coming six months as it has the past six.”