View the article online at http://citywire.co.uk/money/article/a994156
SME Loan Fund plans break with GLI in bid for scale
Small direct lending trust plans to sever ties with founder GLI Finance in attempt to boost assets.
The SME Loan Fund (SMEF ), the small directing lending investment trust set up by GLI Finance, plans to break ties with its founder in a bid to gain scale.
The trust launched in 2015 amid a boom in peer-to-peer lending launches, yet was able to raise just £12.4 million capital. Assets currently stand at £53 million, mostly from an initial portfolio of loans transferred by GLI Finance (GLIF ) as part of the launch.
The SME Loan Fund said that GLI had agreed to sell its 48% stake in the trust through a placing. Should the placing prove successful, the SME trust will switch management from Amberton Asset Management, 50% owned by GLI. If it is not, the board will propose the wind-up of the trust.
GLI Finance, an investment trust in its own right, said it would use the money from a share sale to repay a £14.9 million loan to strengthen its balance sheet.
The SME Loan Fund board said the move should 'address investors' concerns regarding conflicts of interest between the company, its current investment manager and its largest shareholder', improve the liquidity of its shares by diversifying the investor base, and 'enhance the prospect of increasing the size of the company through share issuance in due course'.
The trust plans to hand management to SQN Capital Management, managers of the SQN Asset Finance Income (SQN ) investment trust, focused on asset leasing. SQN has committed to buying up to £7 million of shares in the secondary placing, priced at 90p per share, a 9.6% discount to net asset value and a 3.2% discount to The SME Loan Fund's 93p price at yesterday's close.
The move would involve a rise in management fees, with SQN entitled to 1% of net asset assets up to £250 million, 0.9% on assets between £250 million and £500 million, and 0.8% on assets above that. Currently management fees are set at 0.75% for the first £100 million assets and 0.5% above that.
The SME Loan Fund board also propose to widen the trust's investment policy. At launch, the trust was intended to buy loans originated by the lending platforms in which GLI Finance was invested.
Manager Graham Glass was later given freedom to invest in loans from other platforms, and the board have underlined this move, saying the changes would remove 'any obligation on the company to invest through SME loan origination platforms and SME finance companies in which GLI Finance holds strategic equity investments'.
The SME Loan Fund's struggle to attract assets contrasts with the glut of money that has flowed the way of rival peer-to-peer lending trusts, which have lured investors with the prospect of high yields.
P2P Global Investment (P2P ), which launched in 2014, boasts £835 million of assets, while VPC Specialty Lending (VPC ), launched a year later, stands at £363 million and Honeycomb (HONY ) has amassed net assets of £202 million since launch just over a year ago.
Analysts at Numis have flagged that The SME Loan Fund has not offered the diversification of its rivals, with 10 of its biggest loans making up 18.5% of the portfolio.
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In this guide to investment trusts, produced in association with Aberdeen Asset Management, we spoke to many of the leading experts in the field to find out more.
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Look up the investment trusts
- SME Loan Fund (Ordinary Share)
- GLI Finance (Ordinary Share)
- SQN Asset Finance Income (Ordinary Share)
- P2P Global Investments (Ordinary Share)
- VPC Specialty Lending Invest (Ordinary Share)
- Honeycomb Investment Trust (Ordinary Share)
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by Daniel Grote on Mar 30, 2017 at 16:21