SQN Secured Income Fund PLC Kepler Trust Intelligence: New Research

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SQN Secured Income Fund PLC

15 February 2019

SQN Secured Income Fund: New research

15/02/19

-- SQN Secured Income Fund (SSIF), previously named the SME Loan Fund, has been transformed under new manager Dawn Kendall, who took over in April 2017

-- The new strategy is designed to avoid the errors others have made in this space and benefit from a reduction of competition in this niche area

   --    SSIF targets a high monthly dividend from direct and platform lending to SMEs 

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SQN Secured Income Fund (SSIF) lends to small and medium-sized businesses, targeting a 7p dividend paid monthly and a total return of 8% net of costs.

The company, previously named the SME Loan Fund, has been transformed under the new manager Dawn Kendall of SQN Asset Management, who took over in April 2017. A number of funds in the peer to peer lending space have run into trouble in recent months and the new strategy of SSIF is designed to avoid these errors and benefit from the reduction of competition in this niche area.

The new strategy focuses on direct lending to corporates, originated and underwritten by the manager, with exposure to P2P platforms cut to 33% from 100%, thanks to jettisoning investments with poorer underwriting standards made by the previous manager. Platform-sourced investments will fall to just 20% of the portfolio when the manager-led transformation has been completed, allowing the manager greater control over the quality of the underlying loans.

The company is designed to take advantage of a gap in the market: banks do little lending in the GBP1m to GBP20m issue size space due to regulatory capital requirements and the complexity of the deals, meaning that SSIF can be highly selective and generate yields of 9-12% on their lending. Under the new manager the dividend, forecast by the manager to be 7p this financial year (for a prospective yield of 7.6%), we understand will be covered once committed capital is deployed by the end of February.

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February 15, 2019 04:00 ET (09:00 GMT)