Funding Circle Holdings plc (LON:FCH) supports the announcement made by the Funding Circle SME Income Fund Limited (“FCIF”) today and the preference from major shareholders to cease reinvestment in new credit assets and proceed with an orderly return of capital to shareholders.
FCIF listed on the London Stock Exchange in 2015 with the objective of providing public market investors with exposure to a diversified portfolio of Funding Circle’s small business loans across all of its geographies. Since launching, FCIF has generated an annualised net return on assets of ~5% for investors.
Since 2015, Funding Circle has significantly broadened its mix of funding sources and the business has become more international in nature. As a result, FCIF has become a declining part of its overall funding mix and was projected to fund only ~3.5% of Funding Circle’s origination volume in 2019. In addition, Funding Circle has been developing new single currency private funds, which have a cost and operational benefit.
New Product Initiatives
At its recent full year results, Funding Circle announced two new institutional investor products designed to widen the universe of investors that can access the platform, in line with its FC2020 strategy set out at IPO which included ‘diversifying funding sources’ as one of its key pillars. Funding Circle intends to launch the following additional products in the UK.
● A UK private direct lending fund: This fund will be structured in a similar way to the recently launched Continental Europe private direct lending fund. It intends to raise more than £200 million from UK institutional investors over the next few years.
● A UK bond product: Funding Circle is in discussion with the British Business Bank to transfer the £150 million facility from FCIF to Funding Circle, with the intention to use this facility to launch a UK ABS bond product in 2019.
Funding Circle confirms that financial guidance for 2019 provided at the full year results remains unchanged.
Samir Desai, CEO and co-founder, said: “A global income fund providing access to a diversified portfolio of Funding Circle small business loans was the right strategy for investors and Funding Circle in 2015. However, there are now more appropriate and varied ways for investors to participate on the platform. We’re pleased to soon introduce two new investor products to the UK market. They will further expand the universe of investors that can access loans on our platform and continue to diversify our sources of funding, in line with the strategy we set out at IPO.”