The various listed funds operating in the UK P2P market will soon be eligible for ISA investment.
The HMRC rule change will come into effect on 1st July 2015. Previously, the likes of P2PGI, Victory Park Capital’s Specialty Lending Investments and Ranger Direct Lending were off limits to stocks and shares ISA investors. The Government has now lifted that restriction. Many commentators believe this to be a logical step, given that direct P2P investors will in time also benefit from the shelter of the ISA tax wrapper – likely in the form of a newly created “lending ISA”.
Guy Rainbird, who is Public Affairs Director at the Association of Investment Companies (AIC), commented:
“The investment company sector has responded quickly to the growth of peer-to-peer financing. Recent fund launches give retail investors the opportunity to access this market in a way which spreads their risk and gives them the benefit of expert due diligence.”
“Given the Government’s decision to let direct investors hold peer-to-peer investments in their ISAs it made sense to adopt the same approach where they chose to invest via an investment company.”
“Today’s announcement shows the Government’s determination to make sure that tax favoured investment keeps pace with market changes.”
The AIC had called on the Government to open up alternative finance-focused funds to ISA investors earlier this year.
The funds themselves have had no problem attracting capital so far. The AIC reports that P2PGI currently has £198.68m in assets, with a further £248.66m held by P2PGI C Shares. Ranger Direct Lending has £132.84m, whilst VPC’s Specialty Lending Investments boasts just shy of £200m, with £195.76m.
We also recently learnt that P2PGI is considering the issuance of a further batch of C Shares. Given how quickly the company’s first two share issues were filled, and with the advent of stocks and shares ISA eligibility only a few weeks away, the oversubscription of the next round feels like a foregone conclusion.
Simon Champ, Chief Executive of Eaglewood Europe, the manager of P2P Global Investments, weighed in:
“The Treasury has been consulting on this for some time and it is very positive that all the advantages of investing in the peer-to-peer sector via an investment trust can be available to ISA investors. We continue to await developments with regards to direct investment in peer-to-peer assets which at present are not eligible for inclusion in an ISA.”
Simon Atkinson of Liberum, which acts as the placing agent for both P2PGI and Ranger, summarised:
"The eligibility for stock and shares ISAs of investment trusts that invest in P2P loans and other non-bank loans is a major boost for Alternative Finance as an investment asset class.
Investment trusts, such as P2P Global Investments and Ranger Direct Lending, provide investors exposure to a highly diversified portfolio of loans and are playing a substantial role in making the asset class mainstream. The ability to hold shares of these funds in an ISA broadens their appeal further and will be a significant catalyst for attracting new investors."
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