Two institutional investors increasing stakes in Funding Circle and Honeycomb investment trusts

By Daniel Lanyon on Monday 12 June 2017

Alternative Lending

While the asset class has broadened out into many niches, demand remains high for new issuances.

While the asset class has broadened out into many niches, demand remains high for new issuances. 

A confluence of factors in the post financial crisis era prompted the rise of non-bank lending as demand for borrowing increased at the same time investors began to feel the pinch from low years of low interest rates and falling bond yields and began to back alternative income assets.

Investors began to pile in to non-bank lending across various different markets including direct lending and P2P lending.  In the UK first movers took advantage of the closed ended investment trust structure and formed a whole new sub-sector of portfolios offering exposure to the illiquid Alternative Credit market.

Two newer entrants include the £405m Funding Circle SME Income fund, launched November 2015, and £300m Honeycomb, launched December 2015. The two portfolios differ greatly but both are products of the bank-deleveraging trend and have seen their assets grow as high investor demand has also prompted new issuance of shares.

Both have raised new money recently from some of their existing largest shareholder, who clearly are pleased with the trusts’ performance in the first 18 months or so.

The Railways Pension Trustee Company recently increased its stake in Funding Circle SME Income to fund to a 26.18 per cent of total share capital making their holding worth – according to today’s prices – more than £100m.  The Railways Pension fund amounts to about £25bn of assets run along a multi-manager basis. 

Invesco Perpetual, which backed Honeycomb since launch, recently increase its stake following an oversubscribed share issuance of more than £100m. It now has 37.8 per cent held in the fund, representing £113m at today’s share price.  Head of UK equities at Invesco Perpetual, Mark Barnett, controls most of the Honeycomb stake which he spreads across his two giant equity income funds as well as another investment trust. 

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