Honeycomb Investment Trust is set to become a commercial company, raising questions about the future of the dwindling alternative lending-focused investment trust sector.
Last month, it emerged that London-listed Honeycomb will buy Pollen Street in an all-share deal that values the investment manager at £285m.
The new entity will move from being an investment trust to a commercial company. However, it will continue to invest in direct lending opportunities, said Honeycomb’s announcement on the London Stock Exchange.
The departure of Honeycomb means that Victory Park Capital Specialty Lending (VSL) will be the only alternative lending-focused investment trust left on the market.
Just a few years ago, investors were spoiled for choice with a range of listed investment trusts focusing on peer-to-peer lending and other alternative investments.
The first P2P-linked investment trust – P2P Global Investments (P2PGI) – was launched in 2014. It went on to rebrand as Pollen Street Secured Lending (PSSL), before being bought out by Waterfall Asset Management and wound down.
Funding Circle – one of the largest P2P platforms – had its own dedicated investment trust, called the Funding Circle SME Income Fund. However, it announced plans to wind the trust down in 2019, having been hit by hedging costs and the impact of new IFRS accountancy reporting requirements.
And Ranger Direct Lending announced its plans to wind down in 2018, following poor performance and an ongoing dispute with its Princeton holding, which subsequently went bankrupt.
However, it should be noted that VSL is still going strong after reporting returns of 15.21 per cent for the first half of 2021, thanks to new investments, risk mitigation, and the resilience of its existing investment portfolio.
Read more: Honeycomb increased NAV last year