The Seneca IHT Service is an unquoted Business Relief product, which lends on a secured basis across four different lending strategies. These are commercial property, stock finance, social residential housing and vehicle financing. The first two of those are by far the largest, while the others are particularly niche. There is no gearing. The product offers both capital and income options, with a target return of 4% p.a., which it has consistently matched since 2017.

Why invest

Positives

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

Issues

• Strategies in run off:  Two of the current trades are not getting new lending, reducing diversification.

Management

Positives

• Team: Much of the lending is made by specialist teams within the Seneca group, which 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, with two active. While property lending has some concentration, the SME book is 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 1% + VAT initial fee and 0.5% + VAT dealing fee 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.