Funding Circle fund reveals IFRS 9 NAV

By Daniel Lanyon on Tuesday 15 May 2018

Alternative Lending

The investment trust could be set for an uptick in returns in the coming months, according to analysts at Liberum.

Funding Circle fund reveals IFRS 9 NAV
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The £308m Funding Circle SME Income fund has revealed its April performance, showing a 0.6 per cent decline for the month, according to filings.

The fall, however, reflects the introduction of new accountancy rules called IFRS 9 which changes the way expected impairments are calculated. This reduced the fund’s net asset value (NAV) by 1.1 per cent.  However, under the old accounting regulations the portfolio would have clocked up a 0.5 per cent return for the month in NAV terms.

The implementation of IFRS 9 does not affect the underlying cash flows and so dividends are not impacted, according to analysts at Numis.

The Funding Circle SME Income Fund is the last of its fellow lending focused investment trusts to  disclose the effect of IFRS 9. P2P Global Investments disclosed a 2.2 per cent fall, VPC Speciality Lending 1.7 per cent and Honeycomb 0.8 per cent from IFRS 9.

Analysts at Liberum say the Funding Circle portfolio is performing well ahead of deploying its recent £25m raise from the sale of treasury shares, expected next month.

“The underlying portfolio is generating steady returns, driven by the performance of the UK book. NAV total return to date in 2018 is 1.0 per cent or 2.1 per cent if IFRS 9 is stripped out,” Liberum said.

“We would expect an improvement in returns over the coming quarters as cash drag from the Citibank funding transaction had an impact on returns in Q1. “

The shares currently trade on a 4.3 per cent premium to NAV.

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