KiWi loans set for debut in Canada

“Our strength is portfolio management, credit management and fund management,” Kilgour said, as opposed to the sourcing, underwriting, selling and servicing loan skills of the fintech companies.

“We get paid for managing the credit risk,” he said noting the portfolio of amortizing loans spins off cash on a regular basis, which must be reinvested. Those cash flows are boosted because the borrower can often prepay the loan without penalty.

This week, Kilgour Williams, issued its January 2018 report that shows the fund has now fully deployed the original $30 million provided by the original backers. To invest that $30 million takes a lot of work given that the fund’s average loan is US$12,254. Of the 2,000 loans, 90 per cent are consumer loans with small-business loans making up nine per cent. (Cash accounts for the other one per cent.) From a yield perspective, the original loans are attractive as they come with an average interest rate of 17.02 per cent. Of the loans, 95.8 per cent are current; four per cent are late and a mere 0.2 per cent are in defaults.

The January numbers are similar to the December results. Then the average interest and the average loan provided were a tad smaller at 15.75 per cent and US$12,026, respectively.

For those who provided the original $30 million investment, the news is also good. For the month the distribution was 0.7 per cent or 8.40 per cent on an annual basis — in line with the target rate of return. At 0.7 per cent the distribution is the highest so far.

“Over the past six weeks there has been considerable volatility in equities and bond markets,” said Kilgour, noting that inflation fears haveledtoasell-offinfixed income markets. “But in the private credit world we have a stable net asset value and we are splitting our income.”

If rates rise, Kilgour argues the portfolio’s short duration (the relationship between price and a change in interest rates) will provide some protection for the portfolio. “We will be reinvesting principal at the higher rates,” he said.