The Rockpool Inheritance Tax Service invests in two lending strategies: senior secured loans to small corporates as part of private equity deals, and asset-based lending, which is to reserve power companies and is mostly secured on energy contracts. The underlying company has 24 loans in its current portfolio. The service has been running since 2012 and, other than a short period in 2018/2019 when it had some bad debts, has largely reached or beaten its target return of 4% p.a. Currently, its run-rate return is significantly above that, with a meaningful provision reserve built up too.

Why invest

Positives

• Strategy: To lend as part of private equity deals with small corporates, with loans on a senior secured basis.

Issues

• Concentration: At 24 loans, the loan book is not as diversified as others in the market.

Management

Positives

• Team: Rockpool has an experienced team, which has been investing in these structures for some time.

Issues

• Track record:  The loan book has experienced some credit losses; they were some time ago, however, with excellent performance since.

Nuts & bolts

• Governance: There are no independent directors.
• Diversification: The company lends across a single strategy, with some residual loans to former EIS companies. Currently, there are 24 loans.
• 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 1.5% p.a. of lending.
• Other fees: There is no initial fee or no performance fee. Rockpool charges borrowers arrangement and monitoring fees.

Risks

• Target returns: The target return is 4% p.a. With the exception of a couple of years, the target has been reached consistently, and is currently exceeding that.
• Investment risk: In common with most products in the non-AIM Business Relief (BR) sector, Rockpool targets a return that is meaningfully lower than the yield on the underlying assets. Security is taken over borrower assets, but this is primarily cashflow-based lending.