Funding Circle closes a troubled SME income fund
After months of strategy adjustments, defaults and changes in market exposure, Funding Circle’s SME income fund is expected to close, pushing shares of the alternative loan company down on Friday April 5.
the Financial Time has announced that Funding Circle SME Income (FCIF), the sister investment trust of Funding Circle, will close following below-than-expected returns. The fund was launched in 2015 to finance Funding Circle loans on its marketplaces in the United States, United Kingdom, Germany and the Netherlands. Reports noted that returns for investors have stagnated in recent months, with the Funding Circle board revising expected returns to between 6 and 7% down to just 4% for 2019.
Now, the fund has announced that it “will stop investing in new credit assets and begin a process of repaying capital in an orderly and prompt manner,” according to the reports.
In an interview with the FTJefferies equity analyst Matthew Hose said the move was “not an unexpected result, given the fund’s recent struggles.”
Last December, the Peer2Peer reports mentionned The FCIF recorded an increase in business defaults last August to seven, down from an average of six for the year, as the value of these defaults is also on the rise.
While the FCIF said in a statement at the time that the stats were “well within normal month-to-month statistical variability,” they followed Funding Circle’s recommendations. previous decision to reduce the fund’s exposure to the US market.
At the same time, Funding Circle announced its intention to secure additional UK funding from the British Business Bank. Reports published in AltFi in July indicated that Funding Circle was planning to reduce its US holdings by as much as 10%, although it wanted to maintain some exposure in the United States to diversify its portfolio.
The latest news suggests the efforts have not given the boost to investors the company is hoping for. The outlet said the company’s shares fell 7%.