The closed-ended portfolio, which recently changed its name, has been undergoing a shift away from its legacy portfolio.
The £1.1bn Pollen Street Secured Lending fund saw returns improve in the third quarter of 2019 as the fund continued to shift towards whole loans back by property.
Pollen Street Secured Lending, which sits on a 12.4 per cent discount to its net asset value (NAV), saw a return in NAV terms of 1.65 per cent in the three months to the end of September.
During this period the fund’s manager, Pollen Street Capital sold its largest position, its stakes in Castlehaven Finance, an Irish alternative development and bridging finance lender. This included a 25 per cent equity stake in Castlehaven Finance, together with other loan and debt interests.
The gross proceeds of c.€250m, have started to be deployed with four deals closed in October to deploy the proceeds of the sale.
Following the sale of the Castlehaven position, the portfolio mix has shifted slightly with a higher weighting of whole loans, according to analysts at Liberum. Real estate remains the highest sector weighting with 41 per cent of the continuing portfolio.
“The continuing portfolio has delivered consistent underlying income returns in the year. The overall NAV return was impacted in the early part of the year by issues relating to the legacy portfolio. The impact of the legacy portfolio and equity positions should decline as the exposure decreases. The sale of the Castlehaven equity position reduces exposure to equity investments from £45m to £34m,” Liberum said.
“The change in the investment strategy since 2017 has resulted in a more robust portfolio delivering improved returns with lower leverage. The underlying income performance of the portfolio is broadly in line with the level required to meet a 15p distribution. We expect the company will be able to increase the dividend in the near-term as the weighting of run-off assets decline further.”