Honeycomb fund ups leverage after strong run

By Daniel Lanyon on 26th November 2018

Alternative Credit

The investment trust has been increasing its debt to equity ratio throughout 2018 after a £100m share issuance.

Honeycomb fund ups leverage after strong run

The £446m Honeycomb investment trust has ramped up its debt to equity ratio to 47.6 per cent following a strong run of monthly returns in 2018. 

Its net asset value [NAV] return in October was 0.67 per cent for the month. 

Gross investment assets rose from £562m to £575m in the month, increasing the debt to equity ratio to 47.6 per cent, or £189m, nearly double the rate it stood at six months ago.  In June its debt to equity was 25.2 per cent of assets but has grown steadily since.

Pollen Street Capital, the manager of the fund, says that it is seeing ongoing strong performance from the underlying portfolio and that it has a high allocation to loans with either downside protection or loans with significant seasoning.

Analysts at Liberum say year to date NAV total return is 7.2 per cent (6.4% after IFRS 9 adjustment).

“The credit performance of the portfolio is the key reason for the fund's strong performance since launch. At 30 September 2018, the annualised bad debt expense was 1.1 per cent. We expect a small uplift in monthly NAV returns as the leverage ratio approaches the 50 per cent level.“

Comments

AltFi London Summit 2019

Now in its sixth year, the AltFi London Summit returns on 18th March 2019 to 155 Bishopsgate. Last year proved to be a crucial turning point for the key players building the future of finance. Leading platforms launched oversubscribed IPOs, digital banks proliferated and mainstream financial institutions started their own disruptive propositions. With 2019 certain to be another landmark year, more questions will be asked by regulators with investor interest in disruption also poised for more rapid growth.

18th March 2019