Debt funds dominate investment trust launches

UK-Currency-Money-Pound-GBP-700x450.jpgDebt funds dominated new launches in the investment trust space last year, accounting for 40 per cent of new funds.

Research from QuotedData found that 10 of the 25 investment companies launched in 2015 were in the debt sector, following the popularity of the online lending market.

Prominent launches in the peer-to-peer space last year included Honeycomb, which raised £100m at the end of last year, Funding Circle’s SME Income Fund, which raised £150m and VPC Speciality Lending, which launched in March with £200m.

However, investors still remain wary of this newer area of the market, with discounts widening and fears about a prominent lender failing highlighting jitters.

The median discount for the debt sector is currently a 1 per cent discount, compared to a 2 per cent premium at the start of 2015.

The failure of Europe’s listed online lending platform TrustBuddy has added to skepticism on the sector.

QuotedData research director James Carthew says: “Looking at P2P trusts, few of the funds are now trading on meaningful discounts, which may be a result of indigestion in the debt sector, as so many funds have been launched over the year.

“Another notable issue has been investor concern about the high-profile failure of TrustBuddy.”

The second largest fundraise of the year came from established online lending provider P2P Global, with £269.4m of money raised.

The popularity of the debt sector is due to investors continuing to hunt for yield and diversified income outside of the equity space, says Carthew.