The Seneca IHT Service is a non-AIM/unquoted BR product. It will invest in Seneca Secured Lending Limited and/or Seneca Secured Finance Limited, depending on the desired mix of capital and income returns. Both lend on a secured basis in a variety of areas. Both have a target return of 4% p.a., with Seneca Secured Finance paying its return as a dividend.

Why invest

Positives

• Strategy: To lend on a secured basis to property buyers and provide specialist car finance and stock lending.

Issues

• Credit loss: Seneca experienced a meaningful credit loss in 2017, but has improved its profile substantially since then.

 

Management

Positives

• Team:  Much of the lending is made by specialist teams within the Seneca Group who have experience in the appropriate areas.

Issues

• Track record:  Although the team has an excellent track record to date and lengthy experience, it has not yet experienced a full credit cycle.

 

Nuts & bolts

• Governance: There are no independent directors.
• Diversification: The company lends across four different strategies. While property lending has some concentration, the consumer and SME books are better diversified.
• Valuation:  Loans will be valued at face value, less impairments, with transactions at NAV.

 

Fees

• Annual fees: There is an annual charge of up to 1% p.a., although the companies have direct employees and an overall fee cap of 3% p.a.
• Other fees: There is a 2% + VAT initial fee and 0.2% +VAT on all trades, plus other sundry fees; there is no performance fee.

Risks

• Target returns: The target return is 4% p.a. Since 2017, Seneca has reached this target consistently.
• Investment risk:  In common with most products in the non-AIM Business Relief (BR) sector, Seneca targets a return that is meaningfully lower than the yield on the underlying assets. The security looks to be more robust than that of some other lenders in the space.

Download the full report