Honeycomb fund ups leverage after strong run

The investment trust has been increasing its debt to equity ratio throughout 2018 after a £100m share issuance.

The £446m Honeycomb investment trust has ramped up its debt to equity ratio to 47.6 per cent following a strong run of monthly returns in 2018. 

Its net asset value [NAV] return in October was 0.67 per cent for the month. 

Gross investment assets rose from £562m to £575m in the month, increasing the debt to equity ratio to 47.6 per cent, or £189m, nearly double the rate it stood at six months ago.  In June its debt to equity was 25.2 per cent of assets but has grown steadily since.

Pollen Street Capital, the manager of the fund, says that it is seeing ongoing strong performance from the underlying portfolio and that it has a high allocation to loans with either downside protection or loans with significant seasoning.

Analysts at Liberum say year to date NAV total return is 7.2 per cent (6.4% after IFRS 9 adjustment).

“The credit performance of the portfolio is the key reason for the fund's strong performance since launch. At 30 September 2018, the annualised bad debt expense was 1.1 per cent. We expect a small uplift in monthly NAV returns as the leverage ratio approaches the 50 per cent level.“