VPC Specialty Lending posts record returns as discount deepens
VPC Specialty Lending (VSL) ended 2019 with a record net asset value (NAV) return.
It comes as the investment trust spent much of last year trying to reduce its discount to NAV through share buybacks, investor roadshows and by shifting from marketplace lending to balance sheet-focused assets.
An update for the fourth quarter of 2019 from the alternative finance-focused fund showed a NAV return of 11.34 per cent for the year and a total net revenue return of 9.83 per cent, both representing full-year return records for the investment company.
“The strong revenue returns were driven by positive performance of our balance sheet investments as our portfolio companies performed in line with underwriting,” VSL said.
“Capital returns included a mix of strong equity performance offset by foreign exchange hedging costs and some additional reserves.”
VSL said it was regularly monitoring its portfolio for risks from the coronavirus outbreak, claiming it will have a “relatively minor capital impacts in the near term.”
Read more: VPC Specialty Lending shrugs off Woodford sale with record quarterly NAV
“The company’s current investment exposure is predominantly in the US,” VSL said.
“We have not yet seen how this situation will ultimately impact our portfolio; however, we understand that events of this scale create both opportunities and threats across the credit market.
“While the stock market has reacted with renewed volatility and fear, there will be sectors that may benefit as a result of the circumstances.
“VSL has always focused on protecting our downside when underwriting and structuring our investments. While we may not be completely immune to what could be short or long-term macroeconomic impacts from this crisis, we believe we are well positioned to withstand significant stress in our underlying credits.
“On a positive note, some market dislocation is likely to provide incremental pricing power, as we have seen in previous times of volatility.”
Back in November 2019, Victory Park Capital expressed frustration that VSL was trading at a substantial discount, despite a continued strong performance.
The investment trust is currently trading at a discount to NAV of 20.1 per cent.
Read more: SVS Opportunity Fund acquires stake in VSL
