Investors may wish to diversify their investments across a wide number of business loans from different sectors. This is to reduce the impact from an individual business defaulting or from a sector being adversely affected by specific trading conditions.
A Diversified Loan Portfolio (DLP) offers investors the opportunity to invest in a selection of loans which have previously been listed on the ThinCats platform. The main benefit is that investors are able to create a more diversified portfolio – for the same level of investment – than investing in loans individually. For example, a £1,000 investment in a DLP could typically provide exposure to between 20 and 40 different loans. However, if you were to invest in loans individually, you would need to invest a minimum of £1,000 per loan.
Please note that unlike investing in individual loans, where there is the potential to sell loans via the secondary market, your investment is tied up during the term of a DLP, typically for two years.
Other points to note
- At the time the DLP is offered on the primary market, the loan payments and material covenant requirements of the underlying loans comprising a DLP are being met in line with their respective loan agreements. These are known as status “A” loans
- You can see details of all underlying loans within a DLP including their respective credit and security grades at the time the loan was drawndown.
- Each DLP will be held for a Target Term, typically two years. DLPs cannot be traded on the Secondary Market.
- All cash flows, capital & interest received during the Target Term will be paid to lenders
- An administration fee of 1.0% per annum is payable on the balance of the outstanding DLP
- The minimum investment is £1,000
- DLPs can be held within the ThinCats ISA for new subscriptions