Alternative Finance Sector Valuations Begin To Settle

Regular readers will be aware of our timely updates on the troubled relationship between mainstream investment and the alternative finance sector. We’re not saying that all the early investments in the altfi sector were foolish, far from it. But it’s true to say that some of the institutional investors did seem to rush in at valuations they have come to regret.

One of the leading investment trusts with exposure to the alternative sector has just reported. AltFi carries detail.

The £1.1bn Pollen Street Secured Lending fund saw a fall in its net asset value (NAV) for the month of November owing to a write-down in its equity stake in Zopa.

Peer-to-peer lender Zopa raised £140m in December allowing it to stay on track for the launch of its long-awaited banking platform. The cash was needed to fulfil regulatory capital requirements, a key requirement for the lifting of restrictions on its bank licence. The new fundraise prompted a fall in its valuation, however, of 47 per cent resulting in a new money valuation of £188m. Zopa only managed to secure the funding the day before the regulators’ deadline.

The decrease in the valuation of the fund’s Zopa stake reduced the investment trust’s NAV by 0.7 per cent.

Pollen Street Secured Lending’s, formerly P2P Global Investments, Zopa position was written down by 63 per cent from £7.8m to £2.9m. The legacy equity portfolio of Pollen Street Secured Lending, is now valued at £27m (3.7 per cent of NAV).

Historical Performance And IFISA Process Guide

  • Money&Co. lenders have achieved an average return of more than 8 per cent gross (before we deduct our one per cent fee). 

That figure is the result of over £19 million of loans facilitated on the site, as we bring individuals looking for a good return on capital together with carefully vetted small companies seeking funds for growth. Bear in mind that lenders’ capital is at risk. Read warnings on site before committing capital.

  • Money&Co. has been lending for over 5 years and has only had one bad debt so far, representing a bad debt rate of 0.03 per cent per annum.

All loans on site are eligible to be held in a Money&Co. Innovative Finance Individual Savings Account (IFISA), up to the annual ISA limit of £20,000. Such loans offer lenders tax-free income. Our offering is an Innovative Finance ISA (IFISA) that can hold the peer-to-peer (P2P) business loans that Money&Co. facilitates. For the purposes of this article, the terms ISA and IFISA are interchangeable.

So here’s our guide to the process:

  • Step 1: Register as a lender. Go to the login page, and go through the process that the law requires us to effect. This means we have to do basic checks on you to comply with money-laundering and other security requirements.
  • Step 2: Put money into your account. This is best done by electronic transfer. We can also process paper cheques drawn in favour of Denmark Square Limited, the parent company of Money&Co.
  • Step 3: Buy loans in the loan market. Once you’ve put cash in your account it will sit there – and it won’t earn interest until you’ve bought a piece of a loan. It’s this final step that requires lenders and IFISA investors to be pro-active. Just choose some loans – all loans on the Money&Co. site can be held in an IFISA – and your money will start earning tax-free interest.

The ISA allowance for 2019/20 is unchanged from last tax year at £20,000, allowing a married couple to put £40,000 into a tax-free environment. Over three years, an investment of this scale in two Money&Co. Innovative Finance ISAs would generate £8,400 of income completely free of tax. We’re assuming a 7 per cent return, net of charges and free of tax here.

Once you have made your initial commitment, you might then consider diversifying – buying a spread of loans. To do this, you can go into the “loans for sale” market. All loans bought in this market also qualify for IFISA tax benefits.

Risk: Security, Access, Yield

Do consider not just the return, but the security and the ease of access to your investment. We write regularly about these three key factors. Here’s one of several earlier articles on security, access and yield.


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Disclaimer: Money&Co.™ is the trading name of Denmark Square Limited, Company Number 08561817, registered in England & Wales, authorised and regulated by the Financial Conduct Authority (FCA). The company is identified on the Financial Services Register under Reference Number 727325. The registered office is 58 Glentham Road, Barnes, London, SW13 9JJ where the register of Directors may be inspected. Denmark Square Limited (ISA manager reference number Z1932) manages the Money&Co. Innovative Finance ISA.