VPC Specialty Lending reports ‘disappointing’ first-half performance
VPC Specialty Lending has reported negative net returns from its portfolio in the first half of 2024, amid a “turbulent” macroeconomic climate and a revaluation of a holding that led to a £11m unrealised loss.
The alternative finance-focused investment trust, which announced last year that it was winding down, reported a total net asset value (NAV) return of -4.76 per cent for the six months to 30 June 2024.
A gross revenue return of 5.46 per cent was offset by a gross capital return of -7.82 per cent.
Read more: VPC Specialty Lending trades at 32.56pc discount to NAV as wind-down progresses
This resulted in a total net return of -£11.03m.
In its half-year report, the London-listed firm highlighted inflationary pressures, high interest rates and wars as headwinds to its performance, as well as “stock-specific issues”.
“The most significant driver of the movement in the equity portion of the portfolio was the unlisted investment in digital insurance platform wefox Holding,” it said.
“Regulatory challenges forced the business to seek further funding, including an additional investment of €0.5m from the company in March as part of total funds raised of €15m. In light of the new funding agreements that WeFox reached, VPC updated the valuation of the company’s WeFox positions. This led to an unrealised loss of £11m (-3.95p).”
The trust entered a managed wind down on 12 June 2023 after the move was approved by shareholders at its general meeting.
VPC issued a 1.89p dividend for the first half of the year. However, it said it expects that the dividend will be reduced further as the portfolio’s income falls during the progression towards wind-down.
Looking ahead, the firm said it is hopeful that the investment environment will improve as markets tend to be cyclical.
“Macroeconomic conditions are still uncertain but are becoming more benign as inflation gradually abates,” the report said.
“Meanwhile, corporate earnings have been reasonably robust.
“We are disappointed by the performance of the company’s unrealised equity portfolio. The core investments in asset-backed securities, the investment manager’s credit expertise and the implementation of judicious risk-management measures have meanwhile all helped the company to continue to generate income in a further challenging period.”
Listed debt funds have fallen out of favour in recent years and VPC struggled to attract investor support. In 2020, it lost a few major shareholders including Invesco and Woodford Investment Management which cemented its demise.
