VPC Specialty Lending has reported destructive internet returns from its portfolio within the first half of 2024, amid a “turbulent” macroeconomic local weather and a revaluation of a holding that led to a £11m unrealised loss.
The choice finance-focused funding belief, which introduced final 12 months that it was winding down, reported a complete internet asset worth (NAV) return of -4.76 per cent for the six months to 30 June 2024.
A gross income return of 5.46 per cent was offset by a gross capital return of -7.82 per cent.
Learn extra: VPC Specialty Lending trades at 32.56pc low cost to NAV as wind-down progresses
This resulted in a complete internet return of -£11.03m.
In its half-year report, the London-listed agency highlighted inflationary pressures, excessive rates of interest and wars as headwinds to its efficiency, in addition to “stock-specific points”.
“Essentially the most vital driver of the motion within the fairness portion of the portfolio was the unlisted funding in digital insurance coverage platform wefox Holding,” it stated.
“Regulatory challenges compelled the enterprise to hunt additional funding, together with a further funding of €0.5m from the corporate in March as a part of complete funds raised of €15m. In mild of the brand new funding agreements that WeFox reached, VPC up to date the valuation of the corporate’s WeFox positions. This led to an unrealised lack of £11m (-3.95p).”
The belief entered a managed wind down on 12 June 2023 after the transfer was permitted by shareholders at its normal assembly.
VPC issued a 1.89p dividend for the primary half of the 12 months. Nonetheless, it stated it expects that the dividend shall be diminished additional because the portfolio’s earnings falls through the development in the direction of wind-down.
Wanting forward, the agency stated it’s hopeful that the funding atmosphere will enhance as markets are typically cyclical.
“Macroeconomic circumstances are nonetheless unsure however have gotten extra benign as inflation regularly abates,” the report stated.
“In the meantime, company earnings have been moderately strong.
“We’re disenchanted by the efficiency of the corporate’s unrealised fairness portfolio. The core investments in asset-backed securities, the funding supervisor’s credit score experience and the implementation of considered risk-management measures have in the meantime all helped the corporate to proceed to generate earnings in an extra difficult interval.”
Listed debt funds have fallen out of favour lately and VPC struggled to draw investor assist. In 2020, it misplaced a couple of main shareholders together with Invesco and Woodford Funding Administration which cemented its demise.