P2P lending fund cites legacy Zopa portfolio for lower returns

The original investment trust offering exposure to p2p and alternative credit assets is continuing its legacy portfolio wind-down.

The £720m P2P Global Investments fund might see a delay in upping its dividend back to the 15p level, according to Analysts at investment bank Liberum.

In February the investment trust saw a 0.31 per cent return in net asset value (NAV) terms as returns, it says, were impacted by poor performance from its legacy Zopa portfolio, the cost of leverage and adverse FX movements.

“The legacy Zopa portfolio continues to deliver poor performance with a year to date unlevered return of 1.7 per cent (gross yield less bad debts and servicing) and after deducting debt costs, generated a negative contribution to the NAV return,” Pollen Street Capital, the fund’s manager, said in an update to investors.

“We continue to reduce the overall exposure, with the remaining NAV exposure to Zopa at the end of February 2019 being £46m, compared to £86.5m at the end of February 2018,” it added.

Analysts at investment bank Liberum say despite the headwinds, in February the NAV was boosted by 6 bps from share buybacks.

The UK-listed fund, which invests now in credit assets raised from non-bank and other specialist lending platforms launched in 2014. It has steadily been moving away from pure P2P exposure towards more niche lending. Its remaining NAV exposure to Zopa is £46m  or 6.4 per cent of the portfolio.

Liberum’s analysts said they expect returns to improve as the weighting of the legacy portfolio reduces but that the lower than expected performance could delay a return to a 15p dividend.

“The volatile performance of the Zopa loans in 2019 and FX movements have contributed to a YTD NAV total return of 0.8 per cent. This is below the level required to fully cover a target quarterly dividend of 15p.”

“Our forecasts assume a dividend increase from 12p to 15p for Q1 2019 (7.3 per cent annualised dividend yield) but there is potential for this to be delayed by a quarter given returns to date in 2019. We believe the eventual dividend increase will act as a catalyst for a share re-rating.”