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 providing 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.