By Daniel Lanyon on 31st May 2017
The closed-ended portfolio has seen testing returns in the past year amid a shift in investment strategy.
The board of the £358m VPC Specialty Lending Investments fund is introducing a hurdle on its performance fees payable to its investment manager Victory Park Capital.
The new hurdle, which came into effect from 1 May 2017, means the payment of the performance fee to the investment manager will be conditional portfolio achieving at least a 5 per cent per annum total return for shareholders. This will be relative to a high water mark starting from 30 April 2017
This new fee structure should help to more closely align the performance incentive for the investment manager with the interests of the company's shareholders, according to the board.
“The board and Investment manager are confident that the 5 per cent per annum total return threshold will be exceeded over the medium term, given the on-going reallocation of capital from marketplace loans to balance sheet loans which, to date, have consistently generated higher returns with lower volatility,” they said.
Analysts at Numis Securities say the introduction of performance hurdles for VPC Speciality Lending as well as for its chief rival fund P2P Global Investments, which was announced earlier in the year, is a positive development as original levies were “excessive”.
“However, we note that the performance hurdles remain below the target returns for the funds and P2P GI’s will only come into effect in 2018,” they said.
Victory Park Capital has seen a steady fall in its share price over the past year as it has transitioned away from p2p and market place lending exposure to balance sheet lending.
Share price performance of VPC Speciality Lending over 1yr
Now the majority of its Funding Circle US and Upstart marketplace loans, have also exited the portfolio, according to VPC, with tranches from two platforms representing 3.65 per cent and 1.48 per cent, respectively, now sold on.
The fund will retain some its non-performing Funding Circle US and Upstart loans, hwoever, which represented 0.68 per cent and 0.21 per cent respectively of the Company's net asset value [NAV] at 31 March 2017.
Including these loan sales, the funds balance sheet investments accounted for 63 per cent of its NAV as at 31 March 2017, as compared to 17 per cent for the marketplace loans sleeve.