Mark Barnett holds key as P2P manager merger could pave way for Honeycomb deal

The fledgling direct lending investment companies sector saw its biggest shake-up yet today as the board of P2P Global Investments (P2P) announced its manager MW Eaglewood would merge with Pollen Street Capital, manager of its stronger performing rival Honeycomb (HONY).

In an announcement to the stock exchange, the UK’s biggest and first listed direct lending fund, which is backed by star fund managers Mark Barnett and Neil Woodford, said it had accepted a joint submission from MW Eaglewood and Pollen Street to run its £822 million portfolio using a ‘more flexible investment strategy’ 

This follows a review of its disappointing performance which has seen P2P miss its dividend target and its shares fall to a steep discount below net asset value.

Under the agreement, P2P’s management contract will switch to Pollen Street Capital, a spin-off from Royal Bank of Scotland’s private equity division, which after the merger with MW Eaglewood will be one of Europe’s biggest investors in specialist lending assets.

The new policy will see P2P sell its holdings in US consumer loans, whose mounting arrears had dented investment returns and hiked costs as the managers sought to hedge out currency movements. In future the level of sterling-based assets would rise and the managers would tighten up on the number of lending platforms through which it buys new loans.

Its original annual total return target would be re-established over the next 18 months and a new peformance-based fee structure introduced, the board said.

This will see Pollen Street, headed by Lindsey McMurray, take 15% of any increase in net asset value over 5% from next year. There is currently no hurdle on the performance fee, although MW Eaglewood had previously cut its base fee by switching the 1% charge to net assets, excluding debt, from gross assets, which includes gearing in the portfolio.

Ian Wace, chief executive of Marshall Wace, the US hedge fund that owns MW Eaglewood and…

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