The SME Income Fund – the first fund structure to have been launched by a marketplace lending platform – has raised gross proceeds of £150m through an IPO on the London Stock Exchange. Rumour of the fund’s launch first emerged in July, with the platform confirming its intentions in September. The vehicle will provide investors (of a mostly institutional variety) with a diversified exposure to Funding Circle loans in the UK, US and Europe.
Funding Circle is reportedly in discussions with the European Investment Bank about securing a financing facility. The SME Income Fund may leverage up to 25% of its assets under management. In September, Funding Circle CEO Samir Desai identified wealth managers, pension funds, mutual funds and asset managers as the fund’s most likely early adopters. These sorts of investors are likely to have supplied the bulk of the £150m.
Richard Boléat, Chairman of Funding Circle SME Income Fund Limited, commented on the listing:
“We are delighted with the very positive response to the Issue. The success of the Issue is a strong endorsement of Funding Circle’s marketplaces, and their focus on small business lending in the UK and the US. We believe that the Company can deliver attractive returns to investors, and that the Company can successfully grow with the Funding Circle marketplaces.”
The success of the IPO is an indication of what seems to be a shift in investor appetite. The moderately leveraged, alpha-seeking investment trusts that have to date stood out as the sector’s dominant institutional vehicles may have had their day. Nearly £1.5 billion has been raised by such vehicles through share issues in the UK, but uptake now appears to be slowing. Victory Park Capital’s Specialty Lending Investments recently closed a C Share offering, raising £183m after having initially targeted “at least” £200m. The GLI Alternative Finance fund raised £12.4m in a recent IPO – which again fell short of the intended mark.
But the Funding Circle SME Income Fund – a lightly leveraged, low fee, passive investment vehicle (which Samir Desai recently compared to an ETF) – seems to have had no problem pulling in its first £150m. And it’s not the only platform-linked fund out there. LendInvest will soon be launching a similar offering. A window of opportunity for such structures appears to have opened.
The Funding Circle SME Income Fund expects for the 150 million newly issued shares to be admitted to the London Stock Exchange for trading at 8am on 30 November 2015. The company’s ticker symbol is FCIF.