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Activist pounces on troubled debt fund

Activist pounces on troubled debt fund

Activist investor LIM Advisors has taken a stake in Ranger Direct Lending (RDL), a troubled high-yielding debt fund backed by Invesco Perpetual’s Mark Barnett.

The Hong Kong-based investment group has scooped up 883,000 Ranger Direct shares as they languished on a 26% discount to asset value following the collapse of a US peer-to-peer lender in which it was invested.

LIM, which last month orchestrated a shareholder rebellion at Phaunos Timber (PTY), now holds 5.5% of the £131 million trust in its LIM Asia Special Situations Master Fund.

Shares in Ranger have plunged 18% this year in response to the demise of Argon Credit, a direct-to-consumer lending platform, which analysts say has raised questions over the fund’s due diligence.

The company, which is managed by Ranger Alternative Management in New York, is in dispute with Princeton Alternative Income, a British Virgin Islands fund through which it invested in Argon. Ranger Direct has 16% of its portfolio invested with Princeton and in April revealed it had taken an impairment equal to 4% of its net asset value from Argon’s bankruptcy.

This week’s share purchases make LIM the third biggest investor in Ranger Direct behind Invesco – whose 32% stake is mostly held in the High Income fund managed by Barnett – and BMO Global Asset Management with 11.7%.

The activist’s arrival raises the prospect of more corporate action in the nascent direct lending investment companies market.

The £2 billion sector saw its first shake-up in May with the proposed merger of MW Eaglewood, manager of the underperforming P2P Global Investments (P2P), and Pollen Street Capital, manager of the more successful Honeycomb (HONY). Invesco’s Barnett was a leading shareholder in both funds.

At least one Ranger Direct investor is hopeful that LIM, which is represented in London by portfolio manager Nicholas Paris, will mean business.

Exeter-based Hawksmoor Investment Management yesterday told investors it owned under 1% of Ranger Direct in its Distribution fund. Its chief investment officer Daniel Lockyer said: ‘We now view this, rather than an income generator with a big fat yield of 15% which we do expect to come in, but a special situation and there is now an activist investor on the register so we are hopeful this holding will contribute to returns in the future.’

Hawksmoor, an active investor in investment trusts, also holds Ranger zero dividend preference shares in its Vanbrugh fund.


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