RM Capital has completed 11 secured loans totalling £38.8 million ($49.8 million; €46.5 million) to UK small and medium-sized enterprises since its fund was floated on the London Stock Exchange in December.
The listed fund provides index-linked loans between £2 million and £10 million secured against assets, such as real estate and plant and machinery.
Chief investment officer James Robson, however, said he had hoped deployment would have been faster by this period, noting a high number of opportunities prior to the listing.
“We would have liked to have seen money deployed even faster because we have lots of opportunities to lend to, but the time taken to provide the documentation and complete the due diligence means it takes a little longer than you might expect,” he said.
RM Capital sources deals from two routes: either through a network of advisors and intermediaries or originating the opportunities in-house, the latter of which is a key focus for the firm’s investment strategy in the long-term.
“The deals we originate internally in our structure take a little longer to flow through, but everything is done on a bespoke basis. They are highly covenanted and don’t typically fit into your standard bank deals. That is why there is an opportunity to provide something of value,” he added.
Nine sectors are represented across the portfolio, including a company providing student accommodation facilities and a UK high street retailer. Average yield across all investments is 8.13 percent once the capital is fully drawn and weighted average life is three and a half years, according to the firm’s latest quarterly report.
The firm is targeting a dividend yield of 4 percent this year and is expected to increase it to 6.5 percent next year.
Plans are in place to establish a revolving credit facility as a way of maintaining the pace of deployment and Robson said the firm is open to the possibility of issuing further C shares in the future as a way of creating an additional revenue stream for the fund.
“[Since going public] it has been about getting the loan commitments out. During that process we obviously don’t have a lot of revenue coming in and typically borrowers don’t draw down from day one, therefore we have a NAV attrition because we need to cover the month-to-month costs.
“But going forward we expect the cash that we have deployed to start to reverse the net interest income and we can pay the dividend that we would like to pay. And also once we grow the fund and have a C share we’ll start to reduce the total expense ratio as the cost will be spread out over a larger capital base,” Robson added.