Direct lending investment trusts have been hailed for their exposure to affordable housing, energy efficiency and regional development.
Analysis by trade body the Association of Investment Companies (AIC), found the debt – direct lending sector, which includes alternative finance focused funds such as Honeycomb and VPC Specialty Investments (VSL), has returned 16 per cent and 44 per cent over the past one and five years.
Average yields in the sector are seven per cent, the AIC said.
An AIC webinar this week also revealed that beyond high returns, the sector can also provide exposure to clean energy, affordable housing and energy efficient homes.
Matthew Potter, partner at Pollen Street Capital (PSC), which manages Honeycomb, said the investment manager is passionate about making a positive impact.
“It is only recently that we have begun to see research and data pick up on the critical role non-bank lenders play in the UK economy, from areas as diverse as driving financial inclusion, regional economic development, green transport, energy efficiency in homes and more,” he said.
“We’re passionate about the potential for positive impact through the lending we provide to non-bank lenders. It is through this lens that we assess opportunities to invest wisely, rather than just applying environmental, social and governance checklists.”
He said PSC’s credit facilities have supported several lending initiatives including providing more than 11,000 households with a new boiler which both increases energy efficiency and reduces energy bills and supporting the government’s emergency lending schemes.
Gordon Watson, partner at Victory Park Capital Advisers, manager of VSL highlighted that as a signatory of the UN Principles for Responsible Investment, the fund recognises the importance of long-term responsible investing.
“This is demonstrated by our track record of providing capital to companies that promote important social issues, including access to capital and financial inclusion,” he said.
Read more: Pollen Street praised as Honeycomb NAV grows