Funding Circle agrees time is right for SME fund closure

Funding Circle confirmed that financial guidance for 2019 remains unchanged as the Funding Circle SME Income Fund (FCIF) announced it was shutting up shop.

FCIF, which has been separately listed on the London Stock Market since 2015 and was projected to fund around 3.5% of Funding Circle's loan origination volume in 2019, said it was beginning the process of returning cash to investors after shareholders accounting for more than two thirds of the register called for it to stop making new investments.

FCIF said it will convene a meeting for shareholders to vote on carrying out an orderly winding down of the company, with the portfolio being realised and not reinvested.

FTSE 250-listed Funding Circle, which generated 55% growth in both underlying revenues and loans under management in 2018 to £141.5m and £3.2bn respectively, said that since 2015 it has significantly broadened its mix of funding sources, meaning that FCIF had become a declining part of its overall funding mix.

Chief executive Samir Desai said FCIF's offering had been the right strategy for investors and Funding Circle in 2015, but "there are now more appropriate and varied ways for investors to participate on the platform", with two new institutional investor products ready to launch this year to further diversify funding sources and expand the universe of investors that can access loans on the platform.

There are talks ongoing with the British Business Bank to transfer the £150m facility from FCIF to Funding Circle, in order to use this facility to launch a UK ABS bond product in 2019.

While a new UK private direct lending fund, structured in a similar way to a recently launched Continental Europe fund, will be looking to raise at least £200m over the next few years.

Funding Circle shares were down almost 5% to 326.65p on Friday, while FCIF was little moved at 85.22p.