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Woodford’s huge P2P sales create deep discount opportunity

Woodford’s huge P2P sales create deep discount opportunity – QuotedData’s James Carthew, interviewed before the Woodford liquidity crisis came to a head, talks about the impact of the liquidation of Woodford’s funds on the P2P lending sector

Woodford’s huge P2P sales create deep discount opportunity

With Neil Woodford’s massive overhang out of the way, are there opportunities to be had in P2P investment trusts?

Peer-to-peer (P2P) investment trusts have largely failed to match the initial hype of early proponents, with downward revisions to returns and higher-than-expected defaults.

But many sector experts believe that it is now getting its house in order, and shares are being suppressed by idiosyncratic issues.

In particular, they point to the unwinding of huge positions in the funds by former sector whale Neil Woodford as having created a massive overhang of stock.

Woodford’s sell-off came….

….Marten & Co director James Carthew (pictured) agreed that the pricing of the sector was largely a function of Woodford’s position as forced seller.

‘Woodford is casting over things he can turn into cash to fund redemptions. He’s trying to sell entire holdings where he can, instead of drip-feeding slices of the portfolio into the market, so as to not depress the price of his portfolio,’ he said.

Woodford was formerly second largest shareholder of P2P Global and VPC, behind only his former Invesco colleague, Mark Barnett.

However, Carthew believed that there were more fundamental problems with the non-bank lending sector.

‘It’s always helpful to remove an overhang, but that’s not the only thing the market’s worried about. The premium ascribed to Honeycomb is curious. I don’t know why the market likes it so much.’

He added that the P2P sector was ‘reaching a tipping point’.

‘The criticism has been: what happens when we have a proper downturn? We’re approaching the point where that will be tested.’

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