Honeycomb fund eyes ramping up SME lending exposure

The investment trust, one of best performing among its alternative credit peers, recently revealed its asset mix and bad debt losses.

Pollen Street Capital, the investment manager of the £497m Honeycomb investment trust, is currently planning to ramp up its exposure to SME lending in the fund, the firm has said.

Last week the firm revealed its asset mix and bad debt losses in its portfolio showing that it had £294m of consumer loan exposure representing 60 per cent of its credit portfolio which in turn makes up the vast majority of the total fund. Property loans represent most of the rest of the credit assets 33 per cent) at £159m.

SME lending, however, makes up just £36m  - or 7 per cent - of the portfolio  but Pollen Street says it is eyeing increasing its exposure owing to "an attractive opportunity". It added that it has recently signed up a new partner.

Its existing book of SME loans have an income yield of 7.3 per cent with bad debts of 0.1 per cent giving risk adjusted yield of 7.2 per cent.

Honeycomb looks set to deliver another year of strong performance in 2018 following returns of 7.8 per cent and 9.1 per cent in 2016 and 2017, respectively, analysts at Liberum and Numis say.

The fund’s net asset value (NAV) total return for H1 2018 was 4.5 per cent (3.8 per cent after adjusting for the effect of IFRS 9).