GLI Finance has confirmed the launch of an investment trust, and the timing couldn’t be better.
We first heard that GLIF was mulling the launch of a Closed End Fund (CEF) in the run up to the AltFi Summit Europe in February of this year. The alternative SME finance organ has now confirmed that an investment trust – GLI Alternative Finance PLC – is forthcoming. The fund will invest in a diversified pool of SME loan assets. These loan assets will presumably be originated primarily, if not exclusively, by GLIF’s portfolio platforms.
As mentioned, the time is ripe for the launching of a UK-based P2P fund. On Wednesday it was confirmed that the various listed funds operating in the UK P2P market will become eligible for stocks and shares ISA investment as of July 1st. GLI Alternative Finance PLC will arrive just in time to benefit.
The GLIF fund will be managed by GLI Asset Management Limited, which is a designated, wholly owned asset management subsidiary of GLIF. The fund will launch via an IPO on the London Stock Exchange.
"The provision of finance to SMEs globally continues to be problematic, with banks only willing or able to provide finance in large loan sizes on very straightforward credit terms or to smaller companies with impeccable credit, presenting the alternative finance market with multiple opportunities.”
“We believe that the Fund will offer investors an alternative way to invest in SME finance assets. Firstly, the loans invested in will be originated principally through the 19 lending platforms in which GLI is the principal external equity investor, and therefore this is expected to offer the Fund continual access to multiple loan opportunities. Secondly, the loan assets to be acquired will be diversified by duration, security type and geography through the platforms with which GLI is strategically partnered.”
As Geoff outlines, the spread of lenders within which GLIF holds equity should provide the new fund with ample opportunity to diversify. Indeed, these platforms cover a whole range of different geographies (UK, Europe, US, Africa, etc.), different asset classes (P2P loans, invoice finance, trade finance, etc.), different duration (see previous bracket) and different credit grades (from sub-prime to super prime). On the basis of current market conditions, the GLIF Fund intends to deliver a net dividend yield to investors of 8% per annum.
GLIF has provided detail around the new fund's management fees: 0.75% p.a. up to £100m, 0.5% p.a. over £100m, charged on the lower of NAV or market capitalisation. Have they been listening to AltFi Investor contributor Mike Baliman – who recently called for a greater level of transparency around management fees within the CEF space?
No performance fee will be paid to the manager (GLI Asset Management Limited), either. It’s important to remember that any money that the fund channels into GLIF’s portfolio companies will gradually drive up the valuations of those companies. If the primary goal is to supply capital to these platforms, then GLIF can afford to offer a relatively cheap management service.
By way of igniting the whole process, a seed portfolio of GLIF loan assets, representing around 20% of the maximum target size of the Fund itself, will be made available for immediate investment. Once the Fund goes public, we’re told that full deployment of the share capital is likely to have been achieved within 6 to 9 months.
GLIF is thrusting itself into crowded pool of investment trusts that includes P2PGI, VPC’s Specialty Lending Investments, Ranger Direct Lending, Rozes Invest and most recently RiverNorth. But GLI Alternative Finance PLC will likely proceed relatively unencumbered by the competition, owing to close ties to the 19 platforms from which it will be purchasing loans. The main challenge will be ensuring that these 19 generally nascent originators can keep pace with investor demand.
AltFi is returning to Amsterdam for its second annual Summit in the city. The inaugural event last year was a roaring success, with key figures from across Continental Europe's alternative finance and digital banking sectors highlighted. These included Jeroen Broekema, managing director of Funding Circle Netherlands, and Mieke van Engelen, head of innovative partnerships at ABN AMRO's standalone lending platform, New10.