Ranger Direct Lending fund mulls bringing in co-manager

By Daniel Lanyon on Wednesday 1 November 2017

Alternative Lending

The investment trust has seen a tricky 2017 and is now looking to diversify its management.

The investment trust has seen a tricky 2017 and is now looking to diversify its management. 

The beleaguered £236m Ranger Direct Lending investment trust is in discussions with potential co-managers, according to a stock market filing.

The fund, a strong performer in 2016, has suffered in 2017 owing problems with its largest holding, the Princeton Alternative Income fund. In the closing weeks of 2016 it was revealed that a direct lending platform in the US called Argon Credit was collapsing. The Ranger Direct Lending portfolio had $28m of indirect exposure to Argon through the Princeton fund.

Since then, legal fees and the uncertainty of the on-going arbitration with Argon and Princeton has dragged on returns. It also says it is expecting lower returns from a portion of the SME loans/business cash advances and consumer loans portfolios.

In addition it has been forced to cut its dividend, expecting to pay dividends of 25p for H2 2017, compared to 46p in H1.

Now, and presumably as a result, the fund’s managers say they are talking to a potential partner who “could assist in and strengthen some or all aspects of the Manager's current role and responsibilities, including identifying new lending categories, sourcing platform partnerships, conducting platform due diligence, structuring investments, portfolio management and back-office support”.

Analysts at Numis Securities say they can understand the plans to strengthen the management team.

“We believe that questions were raised about the manager’s due diligence process by its ill-fated investment in Princeton Alternative Income, a fund that offered exposure to Argon Credit which went into bankruptcy in December 2016,“ Numis said.

As the combined dividends represent a yield of 9.2 per cent on the current share price, with the H2 dividend represents a 6.5 per cent pa yield, the fund could offer some value it should be a while before the uncertainty clears, Numis adds.

“The fund is trading on a 28 per cent discount, and whilst this may offer value, it is unlikely to narrow until there is further clarity on the outcome of the Princeton investment, the outlook for returns from the rest of the portfolio and future management arrangements.”

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