By Daniel Lanyon on Thursday 1 August 2019
The VPC Specialty Lending Investments portfolio saw an uplift in performance in the month of June. Bad luck for the fund manager who was a forced seller in May.
The £292m VPC Specialty Lending Investment trust generated a punchy 2.4 per cent NAV return in June 2019, driven largely by an aggressive month of share buybacks and valuation increases in two of its equity investments.
Fallen star fund manager Neil Woodford exited his entire holding in the VPC Specialty Lending fund in the first week of May as he battled to meet redemptions before his fund was eventually gated. Woodford owned 16.43 per cent of VPC Specialty Lending, equating to £49m. The fund manager has been beset in recent months by ongoing underperformance and has been forced to sell down a wide variety of assets to meet demands from investors for the cash.
VPC's bounce came from one Mexican portfolio company which closed a new equity financing round led by a global bank and an agreed sale of an equity investment at a “significant premium to cost”. No details as yet to which one.
During the month, returns were: 0.9 per cent from income gains and 1.5 per cent from capital gains.
Returns were boosted by 1 per cent to NAV from share buybacks. The fund purchased 15,009,212 of its ordinary shares at an average price of 68.35 pence per share under its share buyback programme.
The capital uplift included the increase from share buybacks and 0.6 per cent from equity investments.
Over the past 12 months, VSL has generated a total return of 10.5 per cent. The portfolio has produced a gross revenue return of 15 per cent before operating expenses and fees. This was reduced by -1.7 per cent of capital losses (mainly relating to FX hedging costs) and fees and expenses of c.3 per cent.
Gearing has also risen from 35 per cent to 42 per cent in the month following a $25m increase in its gearing facility to $100m.
Analysts at Liberum say the fund is increasingly “on the front foot” with strong NAV performance in combination with an improvement in technical factors.
“The company has generated a NAV return of c.15 per cent over the past 18 months. The sale of Woodford stake and the company's successful appeal to be reinstated into the FTSE All Share should improve sentiment towards the shares.”