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Post by marc77 on Sept 3, 2016 15:07:50 GMT
Has anybody looked at or invested in the FC fund? Company's home page: fcincomefund.com/Fund performance: www.hl.co.uk/shares/shares-search-results/f/funding-circle-sme-npvIt's a separate company which raised £150m to invest into loans on Funding Circle (same CEO as Funding Circle). They target 7-8% return off their loans, so fairly similar to what we would target using the autobid function (though of course, no one on this forum would use such a thing  ). -It is arguably more liquid than the SM on FC, except you don't get to set the price -The share price can move weirdly due to market sentiment, separate to the value of the underlying loans. See the share price in the link above since launch: Look at the price in March!! That was the equivalent of going to the secondary market place on Funding Circle itself and buying loans that other punters were offering at 10% discount! I wish I'd known about this then. -The CEO obviously did know about it then. He bought c£150k of stock in late March. source: fcincomefund.com/wp-content/uploads/2016/05/rns-director-share-purchase-2016.pdf-I like the set up. The CEO takes no salary, and the directors' fees in total add up to c£130k pa. Very reasonable. I think the motivation for the fund was to increase the amount available to be lent on the platform by £150m, a sizeable chunk, growing the FC business itself . -Think of the tax implications. On FC you have to pay tax on the interest you get, as it's not available in an ISA yet. But, if you buy this fund, you could buy it in a SIPP or ISA and your dividends would be tax free... -Beware leverage. The fund is borrowing money to then lend into FC at higher rates. Good while the cost of this capital is lower than the return it makes -The fund has predominantly invested (60%) in A+ and A loans (see page 38 of their annual report: fcincomefund.com/wp-content/uploads/2016/06/fcif-final-results-31-march-2016.pdf). Some thoughts: i) this is the underlying distribution on FC itself?; ii) they believe a recession is coming and want the safety and have actively gone for these risk profiles; iii) they have ended up with a lot of property loans which are always A+ or A. Observation iii could be consistent with either observation i or ii. I'm now watching the fund's unit price. When/if it drops below say 95p / share, I'm considering using some ISA funds and stopping lending through the platform itself. Similar exposure, but I've got an immediate 5% upside and tax free 'interest' payments in the form of dividends. One way to frame the choice is would you use the autobid function if it bought loans at a 5% discount and you avoided tax on your interest payments? |
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SteveT
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Post by SteveT on Sept 3, 2016 15:52:56 GMT
I hold it in my ISA (my only direct FC lending these days being a few Es). The fund is obliged to accept those whole loans that are allocated to it, supposedly randomly, so no cherry-picking by risk-band / borrower profile.
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Post by failedtheturingtest on Sept 4, 2016 9:57:14 GMT
I have sold all of my loan parts (at least, all the ones I can sell) and have bought FCIF in my ISA instead. I consider a huge advantage being inside a tax wrapper. The process is a bit dull, though, I sort of miss looking through pitches from prospective borrowers, but that probably wasn't really time well spent anyway. One thing to note, though, is that FCIF is still very new and isn't yet producing the advertised target level of income. A lot of the fund's money (37% as of March) is still in cash, not yet lent out. They intend to gradually buy loans and work up to being fully invested, but at this point a lot of the money isn't generating income yet. FCIF has only paid one dividend of 1% so far (in June), although the aim is to eventually produce annual dividends of 6-7% (based on the current share price). See the annual report fcincomefund.com/wp-content/uploads/2016/06/fcif-annual-report-31-march-2016.pdf and monthly factsheet for more details. |
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fp
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Post by fp on Sept 4, 2016 10:21:51 GMT
I've been looking at this following a brief chat about this earlier in the week with SteveT, as you say they seem to have a lot of uninvested cash and the returns are looking very poor at the moment, but if it gets up to a 6% return in a tax free account, then its looking like a good buy. The price at the moment is 104p, which is a little over NAV, but compared to many shares in the FTSE its actually a good buy provided not too much of the NAV is lost to bad debts. As an example, I sold a good chunk of Eddie stobbart shares earlier in the year at about 117p each because I felt they were vastly over valued and it looked as if the dividends were being funded by the sale of assets, I daren't look at where they peaked a few weeks ago, but they are down to around 160p each at the moment, which is at least double the NAV which from memory was around the 70p mark. So if these do deliver what is expected of them, they are a good investment at the current price, even at 104p |
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ilmoro
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'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Sept 4, 2016 11:32:08 GMT
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rick24
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Post by rick24 on Sept 4, 2016 19:40:08 GMT
As I understand it, the dividend is tax-free up to the personal limit of £5000 (cf pp 104 of the prospectus). Unlike P2P Global IT, which is deliberately paid out as interest and therefore taxable unless held within an ISA. I bought the FC at a small discount to NAV. The price was affected by the Lending Club scandal and dipped into the low 90's or upper 80's if I remember rightly - I wish I had known that at the time - I would have grabbed some! There is no stamp duty to pay (I think this is because it is domiciled in one of the Channel Islands). One advantage is liquidity but there is no guarantee that the share price will stay above the price you paid for it. Another good thing: they are investing in the other FC operations: US and Europe so you get geographical diversification - this could be an advantage if Brexit proves to have a negative effect on the British economy. Not keen on leverage myself.
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Post by davee39 on Sept 4, 2016 20:08:10 GMT
I sold out of FC and moved into P2P Global. I was unhappy with the buy/sell spread on the FC fund. Unlike normal shares I do not expect any significant increase in capital value so this is an immediate loss.
My P2P Global is currently showing a loss, but is standing at an 18% discount and yielding 7% (at the current share price of around £8.25). The asset value is reported monthly and remains steady, the fund has borrowed to invest in loans.
The fund was supposed to yield 7% at the £10 issue price but has failed to meet that target due to 'exceptional factors'. Longer term I expect the discount to narrow.
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rick24
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Post by rick24 on Sept 4, 2016 20:29:33 GMT
I hold some P2P Global as well. I was attracted by the discount as well. As with FC (but with more justification), I think it was hit by the Lending Club scandal. The main disadvantage as I see it is the performance fee of 15%(?) for quite a modest performance threshold.
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nick
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Post by nick on Sept 7, 2016 21:20:27 GMT
Just a minor health warning to the regular people who may think putting cash in this is trivial. You should read and understand the prospectus, understand that the investment trust (IT) is currently available for more than it is worth i.e. it is "trading at a premium", that the targeted yield in the prospectus won't be achieved by a buyer while it is trading at a premium and that if there is a downturn in commercial property, other sellers of this IT could drive the price down far more than if you had bought the loans on the regular FC platform so if you have to sell at that point it could be painful. Realise that the money in the fund is not yet fully invested in P2P loans yet so it again won't yet make the yield it should. Understand there is a "spread" or a difference between buying and selling price, that when buying, you will also lose 0.5% to tax regardless of if it is inside or outside an ISA. If it is bought in an ISA, that doesn't mean it's safer than other stock market investments, there's still no regulatory compensation scheme. To a certain extent, fear and greed bend prices of this product just like other stocks. The vehicle is also leveraged, most recently by the £100M deal with the European Investment Bank with the target return of 8-9%pa assuming a 20%-50% levered basis.
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fp
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Post by fp on Sept 25, 2016 19:28:53 GMT
What are the chances of this taking a dip tomorrow morning due to the reported losses of the FC platform?
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am
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Post by am on Sept 26, 2016 16:02:42 GMT
I sold out of FC and moved into P2P Global. I was unhappy with the buy/sell spread on the FC fund. Unlike normal shares I do not expect any significant increase in capital value so this is an immediate loss. My P2P Global is currently showing a loss, but is standing at an 18% discount and yielding 7% (at the current share price of around £8.25). The asset value is reported monthly and remains steady, the fund has borrowed to invest in loans. The fund was supposed to yield 7% at the £10 issue price but has failed to meet that target due to 'exceptional factors'. Longer term I expect the discount to narrow. I haven't looked into P2P Global in detail recently, but I was thinking that it should have had a NAV uptick from holding US assets due to the post-Brexit devaluation of sterling. But it might have hedged against exchange rate movements. And even if not it might be offset in whole or in part by any borrowing in dollars (for gearing purposes) that it undertook.
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mikeh
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Post by mikeh on Sept 26, 2016 16:16:38 GMT
Yes it hedged and seems to have cost it a fortune somehow. Apparently they now have to hold more cash as well. Hopefully the worst is over.
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nick
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Post by nick on Sept 30, 2016 19:06:22 GMT
Yes it hedged and seems to have cost it a fortune somehow. Apparently they now have to hold more cash as well. Hopefully the worst is over. Their June 2016 newsletter is an interesting read (http://www.p2pgi.com/investorrelations/view/NewsLetterJune2016) re the effect of currency movements on the Brexit vote. About 57% of their NAV is USD denominated which they hedged. Given the c12% decline in sterling the hedge cost to date must be 6%+ of NAV, most of which I assume flowed through to variation margin calls settled in cash. So on this occasion hedging has been very costly neutralising all the translation gains on foriegn debt, but I guess that is the whole point of hedging. It is still trading at a 17% discount to NAV so remains attractive from a medium term value prospective, but can't see any catalyst for a tightening of the discount in the short term. In fact the big US P2P platforms are going through a bit of a rough patch with origination slowing (and in some cases such as Prosper are in significant decline) and default rates rising so there may be more pain before the share price reverts towards NAV. Still, for a 2-3 investment horizon, I'm struggling to think of a better place to put my ISA allowances which are just sitting in cash waiting for IFISA to be launched by the likes of SS, FC etc.......
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