The largest shareholder in the Honeycomb Investment Trust has predicted “future success” following Honeycomb’s acquisition of its investment manager Pollen Street Capital.
Hinesh Patel, portfolio manager at Quilter Investors, told Peer2Peer Finance News that the firm is still bullish on the direct lending sector and expects direct lending to “thrive” in the new digital environment.
It comes a week after Honeycomb announced that it will acquire Pollen Street in an all-share deal that values the investment manager at £285m. After the deal completes. Honeycomb will cease to operate as an investment trust and will become a commercial company instead.
Quilter said that it has been “very supportive” of the deal from the outset.
“Even before the proposed deal, the investment income – and more importantly the way in which the income is generated – are attractive in our view,” said Patel.
“We have enjoyed a strong two-way working relationship with Pollen Street since 2015 and the recent transaction was no different and provides us an opportunity to participate in the future success of what we see as a well-run business by a highly respected team.”
He added that Quilter’s expectations are for the continuing growth of Honeycomb’s assets under management, through both credit and private equity, as well as new fundraises to drive shareholder value.
“With traditional lenders there’s so much baggage and legacy – they struggle to innovate, capture new markets, and serve ‘non-standard’ borrowers,” said Patel.
“There is much upside optionality in the business therefore, and we expect the management to continue to execute with prudence and risk management front-and-centre, just as they have done for many years of their track record.”
Patel added that Quilter’s outlook on the future of direct lending is optimistic, and he expects the sector to “thrive” going forward.
“We expect direct lending to thrive in this new digital environment, but we worry that there will be irresponsible lending as well as responsible lending,” he said.
“Naturally, we focus on the latter and will be very selective in who we choose to manage our clients’ money.”