Returns since the trust’s launch in May 2014 have been lacklustre, delivering net asset value (NAV) total returns of 14.2 per cent and just 3.9 per cent over the past twelve months, according to Numis Securities.
Investors in the trust have likely been disappointed in the slip from a 15 per cent premium when the investment company first listed to a current 23 per cent discount.
The trust’s management group MW Eaglewood Europe has expressed dissatisfaction with net returns achieved by the investment trust in recent months, and blamed a number of factors, including a bias towards US consumer loans, the rise in US Libor, and the drag of cash held to cover currency hedging, as reasons for disappointment.
But the trust continues to be backed by a group of high profile investors, including a 12 per cent stake by fund manager Neil Woodford's firm Woodford Investment Management and 33 per cent held by Invesco Asset Management.
Woodford Investment Management declined to comment on the review, and Invesco Asset Management could not be reached.
Monica Tepes, director of investment companies research at Cantor Fitzgerald, said that she did not expect the two fund houses to drop their holdings in P2P Global but likely voice their opinions on how the trust could be better run.
“I don’t think this is a situation where they would sell, but rather set a framework where interests are better aligned and put in place something more drastic in terms of a discount management policy,” Ms Tepes said.
Charles Murphy, investment companies analyst at Panmure Gordon, said that the review is likely to put a special focus on the fees charged by the trust.
“I don’t get the impression that the review is to result in a change of fund manager, more likely a change or reduction in the fee arrangement.”
He said that P2P Global has an ongoing charges figure (OCF) of 2.75 per cent to 3 per cent, compared to competitor Funding Circle with a 1 per cent fee, while other P2P trusts hover at around 2 per cent.
“Investors are likely wondering ‘why are we paying so much for this if it’s underperforming?’,” Mr Murphy said.
Analysts at Numis Securities called the fees “excessive” despite recent reductions, where management fees were changed from 1 per cent of gross assets to 1 per cent of net assets.
The performance fee is 15 per cent of NAV total returns with a high water mark, but no hurdle, and so Numis Securities suggested either reducing the performance fee or introducing a threshold after which it is charged.
Hurdle rate and high water mark are two types of benchmarks that hedge funds can set as requirements for collecting incentive or performance fees from investors.
A high water mark is the highest value that an investment fund or account has ever reached. A hurdle rate is the minimum amount of profit an investment must earn before it can charge an incentive fee.
Mr Murphy added that while the investment strategy is sound, it has been poorly executed.
“It should be capable of delivering a good risk adjusted return, it just doesn’t,” Mr Murphy said.
“The sharing of the risk and reward is inappropriate.”
The trust invests in peer-to-peer loans that have been taken out by consumers or small to medium enterprises (SMEs) on platforms in the UK, US, and Europe.
Lack of regulation has been a key concern for those considering investment trusts that buy pooled P2P loans, even though the pooled nature of the trusts is meant to spread the risk of default on individual loans.
Last year Lending Club, a leading playing in P2P in the US, caused a negative knock-on effect to a number of P2P trusts, including P2P Global, after its chief executive resigned following a review that found problems with internal controls.
julia.faurschou@ft.com
