The long-awaited GLI Alternative Finance fund has launched, with a market cap of £52.66m.
The majority of that total is comprised of a £40.27m portfolio of GLI loans that have transferred into shares in the fund. £12.4m of fresh capital has been raised via the London Stock Exchange listing (LSE). The vehicle will begin trading on the Specialist Fund Market of the LSE from tomorrow, under the ticker “GLAF”.
GLI first confirmed plans to launch a Closed End Fund (CEF) in June. The initial £40.27m portfolio is comprised of 55 separate loans, ranging between £35k and £9.53m in size. The largest exposures contained within that portfolio are £14.6m to FundingKnight, £5.1m to Legion Trade Finance, £3.7m to Proplend and £2.3m to LiftForward. Those four platforms alone represent four different segments of the alternative finance space: peer-to-peer business lending, trade finance, commercial property finance and balance sheet lending. Therein lies perhaps the key strategic advantage of the GLI Alternative Finance fund: diversity.
We caught up with GLI CEO Geoff Miller to learn more about the newly launched vehicle.
Miller first explained that the GLI fund faces a large amount of origination to fill from the outset, and he expects to deploy the £12.4m very quickly. Further share issues will likely roll around fast, but in the short term Miller expects to exploit the fund’s ability to obtain leverage. Much like rival fund P2PGI, GLI Alternative Finance has the ability to apply leverage of up to 150% of the value of its asset under management, although Miller suggested that he’ll likely be employing around 100% leverage for the first few months.
The fresh injection of share capital will be deployed across the vast majority of GLI's debt-based portfolio platforms. The fund will thus be diversified by, in Miller’s worlds, “duration, geography and type of lending”.
The breadth of exposures that sit within the fund is perhaps its greatest strength. GLI can work with SME finance providers irrespective of the style in which that provider is funding businesses. This may become especially relevant as platforms globally begin to tinker with their capital structures. Take OnDeck, for example, which today operates as both a balance sheet and marketplace lender – after originally operating as the former only. Said Miller:
“We want to be able to look at a piece of paper simply on the basis of risk reward, we don’t want to have to distinguish based on what type of originator sits behind it.”
The other major fund structures (P2PGI, Victory Park Capital, Ranger Direct Lending) each play within a more clearly defined space – whether it be marketplace lending or direct lending. Not so for GLI. Miller’s fund also has the ability to buy primary or secondary market paper. Furthermore, the GLI fund isn't limited to investing only via the companies within which it holds an equity stake (see, for example, the platform's budding relationship with Legion Trade Finance).
Miller also highlighted the GLI fund’s ability to adopt a subordinated position within the funding structure of its balance sheet lending partners. Take Trade River Finance, for example, which is funded by a Santander credit facility. Or The Credit Junction, which has a similar relationship with Victory Park Capital. GLI is able to enter into these capital structures in a first loss taking position – in return for a higher rate of interest. Miller doesn’t consider the risks of such a position to be unpalatable, largely because the originator itself is on the hook before GLI is.
The GLI Alternative Finance fund will play an important role in the company’s master plan, which has been pieced together over several years of patient work. On the driving vision behind the fund, Miller simply concluded:
“What we’re trying to do is provide an institutional, broadly based exposure to the SME finance sector as a whole.”
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.