P2P fund holds steady on dividend

By Daniel Lanyon on Wednesday 26 July 2017

Alternative LendingDigital BankingSavings and Investment

Several factors have boosted the largest Alternative Credit investment trust's performance in 2017.

Several factors have boosted the largest Alternative Credit investment trust's performance in 2017.

Onerous banking regulations will continue to hamper growth in regulatory capital‐intensive lending asset classes, according to the investment managers of the £821m P2P Global Investments trust.

The fund has just announced its second dividend of 2017, at 12p per share. While below target, this positions the portfolio to grow in under‐served specialist lending asset classes allowing for an attractive future dividend income, they added.

As the graph below shows, the dividend - which will be paid 25 August - is holding steady at the same Q1 level of 12p. This follows on from a tricky 2016 when all four of the quarterly income payouts were sub this level. This is below the level required to meet its target 6-8 per cent yield (on issue price), however, with the portfolio in a period of transition it represents a marked improvement for investors. 

Source: AltFi Data

The fund is moving away from a pure P2P play, instead transitioning more into direct lending and other Alternative Credit niches. Its manager MW Eaglewood is also merging with Pollen Street Capital, which while still on-going, is expected to close later this year subject to regulatory approval. Pollen Street is also the manager of £359m Honeycomb investment trust which invests in direct lending assets. 

P2P GI returned 1.15 per cent growth in net asset value (NAV) in the quarter, says Numis Securities' Ewan Lovett-Turner, which while positive is still too low meet its target. 

“June’s NAV total return of 0.29 per cent remained dull, although this was largely expected given that the manager has indicated that it may take c.18 months to re-establishing performance at the target return level of 6-8 per cent pa. The future shape of P2P GI’s portfolio remains unclear. The existing manager has started a portfolio realignment, but we expect even greater changes as the merger of the management group MW Eaglewood with Pollen Street progresses.”

“We understand that P2P GI is likely to look a lot more like Honeycomb over time, utilising a “revised, more flexible investment strategy” and the portfolio will be progressively transitioned into “more attractive specialist assets” and “a tighter group of market place lending platforms.” 

Lovett Turner adds that  while P2P GI has seen its discount trend in from over 25 per cent in 2016 to 13 per cent today, he believes further narrowing will require greater clarity on the portfolio strategy and more consistent NAV returns.

During the second of 2017 quarter, spreads in the fixed income market  tightened aswell as gross yields in UK unsecured consumer loans declining, as competition heated up. This, the portfolio managers believe suggests that there will be less income to absorb potential future losses and as a result has been increasing exposure to secured loans and products with an asset backed structure.

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