Honeycomb fund posts ‘strong’ growth despite gloomy UK economic forecast

The investment trust said it sees ‘significant lending opportunities’ in 2019.

Alternative finance investment trust Honeycomb posted strong growth at the end of 2018, despite “pessimistic” reports about the UK economy in the final three months of the year.

The listed-fund reported an annualised 0.6 per cent net asset value return per share in its December newsletter. This brings its year-to-date return to 8.4 per cent, or 25 per cent since the fund was launched in 2015.

The specialist lender added its assets lifted to £603m from £562m, driven by originations of £78m. The fund, managed by Pollen Street Capital, focuses on consumer, property and small business loans.

Pollen Street Capital said although the fund enjoyed “strong growth” across the last three months of the year, returns in December were lower due to “greater economic uncertainty and a more pessimistic view of the near term potential of the UK economy”.

Growth in the UK's key services sector hit its lowest level since July 2016, according to a closely-watched economic survey last month.

The purchasing managers' index from IHS Markit/CIPS sank to 50.4 in November, down from 52.2 in October. A figure above 50 indicates expansion. The services sector accounts for about 80 per cent of the UK economy.

"The survey results suggest that the pace of economic growth has stalled," added Chris Williamson, chief business economist at IHS Markit.

However, Pollen Street Capital said it “continues to see significant lending opportunities with attractive returns in the company’s chosen markets with the pipeline of new opportunities remaining strong”.

But it added that because the fund is nearing its debt to equity ratios its “capacity for new investments will be limited” in the first quarter of 2019.

The majority of the trust is invested in consumer loans at 48 per cent of assets, totalling £292m. Property loans make up 39 per cent of the portfolio, or £234m, while SME loans account for 11 per cent, or £68m.

House broker Liberum said the fund “has delivered comfortably the highest returns in the sector” due to “the robust credit performance of the loan portfolio, reflecting the manager's financial services expertise and differentiated origination capabilities”.