The Funding Circle SME Income Fund

Last week we gave an update on the upcoming Funding Circle ISA, and explained that it is possible for investors to earn tax-free returns by investing in the Funding Circle SME Income Fund. In this piece we will look at the Funding Circle SME Income Fund in more detail, and how investors could consider including it as part of their diversified investment portfolio.

Before we go on, it is important to highlight that the Fund operates differently to investing directly on the marketplace, and any investors interested in investing in the Funding Circle SME Income Fund should first speak to a financial advisor.

What is the Funding Circle SME Income Fund?

The Funding Circle SME Income Fund is listed on the London Stock Exchange. Last November it raised £150 million from a range of investors – including asset managers, wealth managers and pension funds. Shares in the Funding Circle SME Income Fund may also be purchased by individual retail investors in the UK.

How does it work?

The Funding Circle SME Income Fund provides access to a diversified portfolio of loans originated through Funding Circle’s global geographies in the UK, USA, Germany, Spain and the Netherlands.

Rather than lending directly to businesses on the Funding Circle platform, investors purchase shares in the Fund itself, receiving income in the form of quarterly dividends. The annual target dividend yield is 6-7 pence per share once fully invested. Your actual return may be higher or lower since, like any investment in shares, your capital is at risk.

The Funding Circle SME Income Fund buys up to 35% of loans originated through the Funding Circle marketplace. Like other larger investors, it only buys whole loans and does not compete directly with individual investors, who purchase partial loans. The allocation between whole loans and partial loans remains completely random.

Including the Funding Circle SME Income Fund within your investment portfolio

For many investors, peer-to-peer lending will make up part of a diversified portfolio, with investments often spread across multiple asset classes such as equities, cash, stocks and fixed income products.

The Funding Circle SME Income Fund is an equity investment, so investors’ total return is made up of dividends received, plus appreciation (if any) in the share price of the Fund. Share prices can be subject to volatility over the short term, so the Fund can be considered a longer term investment. For individual investors, this could form part of a Self Invested Personal Pension, (SIPP).  A SIPP works like a personal pension, however investors have full control and make investment decisions on their own behalf. All earnings from investments held within a SIPP are tax-free. Investors can also include their investments in the Fund within a Stocks and Shares ISA.

How can I buy shares in the Funding Circle SME Income Fund?

The Funding Circle SME Income Fund operates as an independent company and investors are unable to buy shares directly from Funding Circle. Investors interested in purchasing shares may want to consider speaking with their financial advisor. For further information on the Funding Circle SME Income Fund, please visit its website: www.fcincomefund.com

We hope this post has been helpful. Over the next few weeks we will be discussing the benefits of tax free investing in more detail.

If you have any questions, please feel free to join the conversation on the forum.

The Funding Circle Team

*This blog post is provided for information purposes only and is not intended to be construed as an offer, invitation or inducement to engage in investment activity in relation to – or a financial promotion of – Funding Circle SME Income Fund. Funding Circle does not give investment advice or recommendations and this blog post should not be relied upon as such*

 

Jack Pritchett

Customer Communications Manager

 

3 thoughts on “The Funding Circle SME Income Fund

  1. i Jason Williams 503-891-2537, I’ve been working everyday with no days off, I’m trying to get into a apartment but it’s so hard with my credit score, it really is, there’s no ( Section 8, Housing Assistance, low income apartments available for me ), I have. Lady and 5month old baby we maybe homeless real soon, it’s sad it really is. I’ve never felt so powerless ever. I just started my job last month and haven’t been able to save because of living circumstances, baby supplies, food and car engine blew on me so now I don’t even have that. It’s been extremely stressful, I honestly want to just break down and give up because I try so much everyday and I’m turned down because of CREDIT. I hate it, I can’t even get a loan. I just need help to get into a place before it’s too late, it’s getting colder outside. I have the urge & strive to do right but I’m not giving any chances at all from companies & system. I’m able to pay $1100.00 a month but so many place requires ( 1st & last months rent plus security deposit and then utilities. I can pay anyone back every month, I just don’t have biological blood family for 7 years now I have no support and I really need it. I’m so worried I can hardly sleep ever. I just need a hand like a co-signer or a loan from anyone personally, anyone that knows me on how persistent I am to get anything done. We all live one life, I’m trying to live happy as well and do what’s right, before I can’t be a father anymore, cause I know I can I just can’t fail that nor have no place to call home, especially for my little baby and lady. I just want to cry cause I never seen me get this far. It’s not because of alcohol or drugs or anything besides, ( Depression), the feeling and thought of me and my little family not able to live because of my ability of credit. Other than that I work everyday like I said I get paid weekly. Anyone and I mean anyone that’s willing to give me a chance will not be disappointed at all, I promise that. We just need a home. A chance. A positive opportunity of success for not just me or lady or baby but for everything &
    everyone, I will be forever in debt to anyone that helps me keep my babies warm. I Need A Miracle

  2. I’ve been eagerly waiting for funding circle to come out with the IFISA but it’s October now and still nothing. I realise it’s not down to funding circle but rather when the FCA can be bothered to roll up their sleeves and get on with the work to approve it. My thinking right now is that the SME income fund is the only way to get P2P exposure within a tax free wrapper. I just want to make sure that there isn’t a key difference between the two that I’m missing. Why is it that the fund value fluctuates? With a normal funding circle account all I need to worry about is defaults. Is the fluctuation in fund value a reflection of this or simple supply and demand of the fund?

    • Hi James,

      Thank you for your question. It is important to note that we are unable to give financial advice or recommendations, and for more information regarding the SME Income Fund it is best to speak to a financial adviser. However to answer your question the share price is largely determined by supply and demand, although it should broadly track the underlying NAV (the underlying value of the Fund’s assets). Thanks.

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