The respective managers of the £822m P2P Global Investments and the £200m HoneyComb investment trusts will merge, creating one of the largest specialist asset management firms focused on non-bank lending.
MW Eaglewood and Pollen Street Capital, the respective two parties, are under discussion as to adjustments to their mandates but Lindsey McMurray, managing partner of Pollen Street, will become head of the new firm which will be called Pollen Street Capital.
P2P Global Investments is the largest closed-ended fund investing in non-bank lending in the UK, having launched three years ago. While, as its name suggests, it originally was a vehicle for exposure to the P2P and marketplace lending market it has moved more into niches within the alternative Credit spectrum in recent months.
This also followed a somewhat tricky time for the fund with performance, while consistently positive in terms of its Net Asset Value (NAV), disappointing some larger shareholders.
As a result, a review was put in place by the fund’s board last month and today’s news is the outcome of that review. Recent returns, however, show a boost in the performance. Total NAV for Q1 2017 was 1.18 per cent and its discount has narrowed to 12.3 per cent. The NAV has also recently been out-performing a benchmark of UK P2P assets. These numbers are shown after fees have been levied.
The share for share merger will mean the firm has over £2bn of assets under management with Pollen Street Capital the larger shareholder in the new entity.
P2P Global Investments will see a transitioning of its portfolio into more attractive specialist assets in a process that is expected to increase the return to 6-8 per cent, according to analysts at JP Morgan Cazenove, but they add this may take up to 18 months to achieve.
“This will be funded from natural amortisation of around 3-5 per cent of NAV per month. There will be a higher exposure to sterling assets but exposure will be maintained to a tighter group of market place lending platforms. The fee will remain at 1 per cent of NAV, and the performance fee at 15 per cent, but a hurdle of 5 per cent, with full catch up, will be introduced from 1 January 2018,” they said.
Simon Champ, CEO of Eaglewood Europe, said: “Since the inception of P2PGI plc in June 2014 the market opportunity and structure for non-bank lending has changed immeasurably. The combination of MW Eaglewood and Pollen Street gives the manager an unparalleled breadth of skill-set and origination sources. We strongly believe the merger uniquely equips the manager for the future evolution of the industry.”
Lindsey McMurray, managing partner of Pollen Street said: “This is an excellent outcome – good strategic outcome for P2P Global Investments PLC, and its shareholders. Good for both firms, and good for the industry.”