P2PGI legacy portfolio continues to drag on returns

P2P GLOBAL Investments (P2PGI) has warned its legacy portfolio continues to drag on its profitability.

A half-year report from the investment trust – which shifted its portfolio from peer-to-peer loans to other specialist alternative assets in 2017 – said its legacy assets are showing “continued underperformance.”

It continues to run-off its legacy portfolio and its exposure has been reduced from 48 per cent in December 2017 to 10 per cent at 30 June 2019, but P2PGI warned the returns continue to be lower than expected.

“While significant progress has been made in transitioning the portfolio to more attractive asset classes and reducing the exposure to the low yielding and volatile legacy assets which have shown continued underperformance, their impact is still felt,” the update said.

Read more: P2PGI blames writedowns and Funding Circle bad debts for poor July

It posted a net asset value (NAV) return of 5.1 per cent for the first half of 2019, an improvement on the 3.3 per cent recorded in the same period last year.

P2PGI’s dividend yield is now 5.8 per cent, behind its target of six per cent, but the investment trust said it was confident of hitting this by the end of 2019.

Read more: P2PGI returns improve as it continues shift away from P2P assets

Aside from issues in winding down its legacy portfolio, the update also highlights Brexit, the possibility of a new UK government and the recent US interest rate cut as key risks.

It is currently trading on a discount to NAV of 13.7 per cent.

However, analysts remain positive on the stock.

“We believe that there could be further upside if the fund can sustain the recovery in returns and grow the dividend to its target level,” a Numis analyst note said.

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