Funding Circle is to list a UK investment trust vehicle dedicated to investing into its own marketplace lending platform.
The vehicle is seeking to raise £150 million ($228 million; €203 million) from long-term investors such as pension funds, mutual funds and wealth managers, said Funding Circle chief executive officer Samir Desai.
The announcement comes as the firm revealed that it is in discussions with the European Investment Bank (EIB) about providing leverage to the vehicle to finance UK SME loans.
The vehicle will target total return on net asset value of 8-9 percent a year and is offering investors an annual dividend yield of 6-7 percent.
Unlike other investment trusts which invest via marketplace lenders, the Funding Circle vehicle will not charge management fees at the fund level, Desai said. The only fee it will pay is the platform’s standard 1 percent servicing charge.
However, unlike other similar vehicles such as VCP Speciality Lending or Ranger Direct Lending Fund, Funding Circle SME Income Fund will only invest via the platform whose management launched it and without the diversity of assets offered by companies that invest via a number of marketplace lenders.
The board is independent with just Funding Circle’s chief executive taking a place, but the vehicle’s mandate is to invest via Funding Circle.
The chairman of CVC Credit Partners’ listed investment trust, Richard Boléat, will also chair the board of Funding Circle SME Income Fund.
The fund’s investments will reflect the overall Funding Circle platform with a minimum 50 percent of the assets coming from its UK business, while US assets should make up about 30 percent of the deals and are capped at 50 percent of the exposure.
The mandate also allows Funding Circle to allocate up to 15 percent of its capital to other jurisdictions, the firm raised capital earlier this year to back its expansion plans. A spokesperson said the marketplace lender is considering jurisdictions globally, but is most interested in Western Europe.
Funding Circle SME Income Fund will invest into the platform on the same basis as other investors and will be limited to 35 percent of the assets sourced by the platform, said Desai. It is envisaged that the vehicle will grow in tandem with Funding Circle’s overall business.
The firm also said that it is in talks with the EIB about providing leverage to the vehicle. The company’s gearing is limited to 25 percent of net asset value (NAV) with the potential for the board to approve an increase in leverage up to 0.5x NAV.
Listed UK investment trusts are growing in popularity as a means of investing in private credit assets. Yesterday, European financial asset manager Axiom Alternative Investments published its intention to list a fund focused on investing in regulatory capital of European financial institutions.
The two most recent marketplace lending-focused investment trusts, VPC Speciality Lending Investments and Ranger Direct Lending Fund, have both signalled that they intend to raise fresh capital.