In August, more corporate borrowers defaulted on their loans issued by Funding Circle's U.S. operations than they did previously in 2018. According to Peer2Peer (P2P) Finance News reports on Friday (Sept. 14), the Funding Circle SME Income Fund (FCIF) revealed there were seven corporate loan defaults in during the month, up from the year's average so far of six per month.
"The company has been advised that this outcome is well within normal month-to-month statistical variability, and U.S. credit performance as a whole remains in line with expectations," the FCIF said in a statement.
Still, the company noted, the value of those defaults has inched higher, too. Reports said the FCIF's net asset value return for August dropped to 0.1 percent from 0.4 percent a month prior, with analysts citing rising impairment charges as a result of the U.S. loan defaults.
"The benefit of higher income and cash receipts from the enhanced leverage will be felt from September onwards," the fund added.
Earlier this year, Funding Circle announced it would reduce the FCIF's exposure to the U.S. market following the expansion of an agreement with the British Business Bank (BBB). In July, the FCIF and BBB announced a formal partnership that would enhance financing of loans issued to small business borrowers via Funding Circle in the U.K. The initiative would cut the FCIF's holdings by as much as 10 percent, reports in AltFi said at the time, adding that Funding Circle would look to maintain its U.S. fund to retain diversity in its portfolio.
"The board sees this as an appropriate and proportionate tactical response to its 12-month forward expectations, taking into account monetary policy efforts," Funding Circle said.
According to reports, the FCIF slashed its dividend target earlier this year, thanks to rising currency hedging costs, as well as pressure from investors for the fund to focus solely on the U.K. market. Funding Circle also recently confirmed its plans to float on the London Stock Exchange, with aims of raising $390 million.