Honeycomb Investment Trust plc (LSE:HONY) said its pipeline remains strong in 2022, particularly with sustainability-linked investments, after last year saw it deliver its strongest annual return in four years.
The trust, which predominantly invests in senior loans to non-bank lenders secured on their underlying loan portfolios, delivered a net asset value (NAV) return of 0.69% for the month of December.
This meant the total NAV return for 2021 was 8.49%, the strongest annual NAV return since 2017.
Returns were achieved through strong underlying credit asset returns of 9.6%, investment manager Pollen Street Capital explained, with the trust remaining fully invested over the course of the year.
Investment assets ended the year at £614mln, up from £571mln a year ago, while around £250mln was deployed as capital was reinvested from loans that repaid and the last direct unsecured consumer portfolio was sold in December 2021 and the proceeds reinvested in senior secured positions.
This reflected the strategy of focusing on senior asset secured exposures and reducing the direct unsecured consumer exposure in the portfolio, Pollen Street said, and saw impairments also improved, down to just 0.01% from 0.86% in 2020.
After making the final disposal, 78% of the credit portfolio in senior assets and 100% structurally secured.
The current pipeline of new deals is roughly £1.5bn, with Pollen Street noting that there a number of opportunities in the sustainability sector.
“As private lending markets continue to evolve in and beyond 2022, Pollen Street Capital continually assess how structural shifts in consumer behaviour and markets create attractive opportunities for Honeycomb Investment Trust.”
These include providing senior facilities to operators of electric vehicle fleets, with Pollen Street having made investments in this sector and expecting further deals form an integral part of 2022 deal flow, as well as an increasing number of opportunities in the electric micro-mobility sector for senior facilities collateralised by fleets.
The trust also aims to finance of newly constructed homes, which are on average at least 60% more energy efficient than the existing housing stock, and the installation of smaller solar projects, which are seen as currently underfunded.
Another potential area is sustainability-linked loans (SLL), which have become increasingly popular and differ from traditional green financing in that they have no restriction on the use of funds but are instead aligned to one or more sustainability performance target.
Read More: Honeycomb Investment Trust PLC eyes pipeline of sustainable