By Daniel Lanyon on Monday 20 February 2017
The P2P and marketplace lending giant closed-ended fund has completed another round of share buybacks in an attempt to narrow its double-digit discount.
The £835m P2P Global Investments trust has completed a new round of share buybacks bringing its holdings in its own shares up to more than 3 per cent of total issuance.
The investment trust is the largest portfolio within the Association of Investment Companies’ universe to invest in the online lending space which includes P2P, marketplace, balance sheet, and direct lending strategies.
It was also the first portfolio to launch into the space back in May 2014. While the portfolio has attracted plenty of cash from some of the most respected investors in the UK market including Neil Woodford and Invesco Perpetual’s Mark Barnett, its early bull run and double digit premium has made way for recent market scepticism and a double-digit discount to its Net Asset Value.
According to the AltFi Data Marketplace Lending Returns Index, the trust has beaten the broader UK marketplace since its launch, as shown in the graph below, however.
P2P GI VS AltFi Data Marketplace Lending Returns Index
Source: AltFi Data
The index represents the return that an investor would have achieved from investing in an equal time weighted exposure to every loan originated by the 4 UK platforms (Zopa, Funding Circle, RateSetter and has beaten MarketInvoice) who together consistently make up over 70 per cent of UK monthly origination. AltFi Data's Aloysius Fekete explored in a recent article how the effects of seasoning make this an important consideration compared to portfolios such as P2PGI.
The trust’s share price has been hit over the past year or so by a bearishness towards p2p and marketplace lending as well as a number of other factors including FX volatility and its exposure to US consumer loans.
Share price performance of P2P GI since launch
Not long after the investment trust’s last Annual General Meeting in June 2016, where shareholders authorised the Company to make market purchases of up to 14.99 per cent of its stock, the firm’s manager MW Eaglewood – led by Simon Champ – kicked off a programme of share buybacks. By mid-December 2016 the fund held nearly 2 per cent of its total shares in Treasury.
Shortly after, it appointed Liberum Capital to manage the share buy-back programme and to effect on-market purchases of ordinary shares. Since then Liberum has purchased shares on 45 occasions bringing total holdings to 2,565,899 out of 86,306,803 Ordinary Shares in issue or 2.97 per cent. Since then, the fund’s discount has narrowed from about 27.9 per cent to 20 per cent today.
P2P Global’s Discount/Premium since launch
Numis Securities analyst team say they have been wary of recommending P2P Global Investment due to its “high fees” and focus on US consumer loans as they say this often represents credit card refinancing.
Nonetheless, they say “a lot of the bad news may be priced” into its current 20 per cent discount.
“Albeit, we believe that the fund needs to start consistently delivering on its expected returns and cover its dividend from revenues before this will narrow significantly.”