Maturity and balance are slowly coming to mainstream finance, following the headlong rush by big investors to get into the alternative finance sector.
Approximately £85m of Honeycomb Investment Trust’s stock was sold [on Monday], as investors took advantage of a share buy-back programme which valued the trust at 850p per share – a 16 per cent discount to December’s net asset value of 1014.9p.
The sell-off represents approximately one quarter of the fund’s portfolio. While the company has announced that it will buy back up to 2.2 million shares, brokerage Numis has reported that approximately 10 million shares had been sold by the end of trading last night.
“The announcement essentially gives the company time to seek to place out the stakes held by selling shareholders,” said Numis research. “The placing will inevitability attract value investors and depending on the nature of buyers it is likely to bring the future of the fund into question.
“A potential catalyst for value investors has recently been removed after the continuation vote, due in 2021, was brought forward to December 2019. Shareholders approved continuation, although clearly had an eye on a different exit mechanism, rather than a protracted wind-down.”
Numis analysts have pointed out that Honeycomb has “an extremely concentrated shareholder register”, with the three largest holders representing approximately 75 per cent of share capital.
The largest shareholders, according to Bloomberg, are Invesco with a 36 per cent stake and Old Mutual with 23 per cent, as well as Link (funds previously managed by Woodford Investment Management) which had an 18 per cent stake, prior to yesterday’s announcements.
Yes You Can, rated B, for £30,000 with an 11 per cent fixed yield, is currently 24 per cent subscribed. More loan offerings will land on site soon.
Historical Performance And IFISA Process Guide
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.
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:
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.