New alternative credit investment trust RM Secured Direct Lending launches targeting 6.5% yield

RMDL is a new UK investment trust established to invest in a portfolio of secured debt instruments to UK SMEs and mid-market corporates.

RM Secured Direct Lending (RMDL) will raise £100m listing on the London Stock Exchange, offering investors exposure to UK SME lending.

The portfolio will originate its own loans to UK firms with ticket sizes between £2-10m mostly on senior secured basis. Predominantly, this will mean investing in higher-yielding lending opportunities with loans secured against contracted, predictable medium to long-term cash flows and/or physical assets. Maturities will range from two to 10 years.

New issuance of investment trusts has slowed in 2016 with the only other Initial Public Offering apart from RMDL in 2016 coming from another alternative credit portfolio, Hadrian’s Wall Secured Investments in June.

James Robson, chief investment officer of RM Secured Direct Lending believes there is a real opportunity in market for lending to UK SMEs, since the global financial crisis of 2008. He says lending to UK SME and mid-market companies has lagged demand, creating an investment opportunity to close the gap.

The firm will seek out companies with a good visibility over cash flow and earnings and strong management teams, supported by tangible security packages, he adds.

Robson says there will also be a focus on loans with a degree of inflation protection through index-linked returns.

"Secured lending offers excellent risk adjusted returns in a part of the market underserved by banks and other non-bank lenders.”