Funding Circle’s winding-down investment fund returned 6.78 per cent to investors over the second quarter of the year, thanks to lower than expected defaults within the loan portfolio.
The SME Credit Realisation Fund released a net asset value (NAV) of 93.59p by 30 June, which represents a NAV total return of 6.78 per cent over the quarter. This is up from a NAV return of 6.4 per cent for the first quarter of the year.
However, the fund’s managers have cautioned that the outlook remains uncertain.
“Borrower payments remained strong and actual defaults on the portfolio were below forecasted levels,” said the fund’s manager in a quarterly commentary.
“That said, elevated uncertainty remains over the future performance of the company as a result of the ongoing Covid-19 pandemic.”
The fund was originally set up to back loans on the Funding Circle peer-to-peer lending platform. In 2019, shareholders backed plans to cease investment in new assets and start returning capital back to investors.
Following the second quarter update, the company will return £18.5m to investors via a compulsory redemption of shares. Shareholders will also receive a second quarter dividend of approximately £1.1m, which works out at 1.3125p per share.
“It is positive to see cash flows from the portfolio above expectations despite the impact of the pandemic, although the outlook remains uncertain,” said a Numis analyst.
“The shares closed last night at 76.8p, which represented [an approximate] 18 per cent discount to the June NAV, or [approximately] 22 per cent adjusting for the capital return. The shares are up 5.5 per cent this morning to 80.99p, which represents a 13.5 per cent discount, or 17 per cent adjusting for the capital return.”