The non-bank lending focused investment trust issued a monthly update to investors on Tuesday, revealing that net asset value (NAV) per share was 1,029.3p at the end of May, representing a NAV total return of 0.77% in the month and 9.0% annualised.
Liberum highlighted that investment manager Pollen Street completed a bond portfolio sale post-month-end at a small premium to the last book value of GBP22.1mln and also removed the company’s exposure to Amigo Holdings.
Out of the market value of the bonds on 26 May was GBP22.6mln, GBP8.3mln was related to the Amigo bonds versus book value of GBP9.8mln.
Liberum analysts said: “Although relatively small in the context of the overall portfolio, the sale of the bond portfolio is helpful for sentiment and the capital can be recycled into attractive lending opportunities.”
With May’s update bringing the year-to-date return to 3.6%, with monthly portfolio returns consistently above 9%, they said the company “remains comfortably on track to deliver another year of 8%+ returns”.
Liberum noted that the diversified loan portfolio comprises 47 investments across property, consumer and SME lending markets, with the majority of loans senior and secured on portfolios of small-balance loans.
“Credit performance has been very resilient and we note the impairment rate declined in 2020 to 1.0% despite wider market challenges,” the analysts added.
In conclusion, Liberum’s view was that “the company’s defensive portfolio of asset-backed loans to non-bank lenders provides scope to earn enhanced returns and retain underwriting control”, with a 8.4% dividend yield “highly attractive given the track record and the level of downside protection”.