Secured debt-focused investment trust RM Secured Direct Lending PLC (LON:RMDL) said its net asset value at the end of June stood at 97.6p per share.
That’s about 5p below the current share price and 2.4p below the price at which the investment trust listed in December of last year. The trust's investment manager said sterling’s weakness against the dollar had made little difference to the net asset value (NAV) as the company’s currency exposure is almost fully hedged.
Since its listing the company’s investment manager has made 18 debt investments across 10 sectors. Around one-fifth of these are in public debt transactions, RM revealed.
The average yield on the investments made within the portfolio is 7.72%, which is expected to rise as additional investments are made.
Overall, the deployment of proceeds has been in line with expectations and now that the majority of the portfolio has been invested the company has a portfolio of cash generating loans that will provide a stable income stream to pay regular dividend distributions.
The company declared its first interim dividend of 0.2p in May, which was paid in June.
The company has tweaked its sector allocation limits, cutting by five percentage points to 25% of the total portfolio the amount that can be allocated to the Technology, Media & Telecoms sector and also the Industrial sector, with the headroom thus created allowing for a lifting of the ceiling on the Property sector weighting from 25% to 35%.
The investment manager, RM Capital Markets Limited, is particularly keen on two sectors: Property Bridging and Asset Finance.
Property Bridging is where loans are made on a very limited loan-to-value basis over property in circumstances where a bank cannot cough up the money quickly enough. RM believes it can fill this gap within the unregulated space by providing the "bridge" and adds value by conducting the due diligence and legal process within an expedited time period.
Funding Asset Finance opportunities are attractive due to recourse to a wide pool of hard assets, guarantees from underlying borrowers and significant sponsor equity, RM Capital said.
The investment manager noted the conjecture surrounding the likely timing of the reduction or removal of quantitative easing – the fabled “taking away of the punch bowl” – and said this has had an effect on underlying bond yields as the market adjusts future interest rate expectations. The price of fixed income instruments tends to decline as expectations of an interest rate hike grow.
“Sentiment has also been weakened by the result of the 2017 General Election and how this affects Brexit negotiations along with a concern as to how they will be conducted with a divergence of views between the hard and soft Brexit camps. These moves unsettle the credit market and we have seen a period of weakness across public transactions,” RM said.
As for the second half of the year, the investment manager is cautious due to the uncertain market outlook and remains vigilant with regards to property prices and the broader economy.
Having said that, RM Capital believes there are still good opportunities to invest in higher yielding secure debt investments and the current pipeline reflects this.