Specialist lender Ranger Direct to issue new shares as it targets a 10% dividend


#1

Originally published at: http://whichinvestmenttrust.com/specialist-len-a-10-dividend/
The specialist trust which listed in London earlier this year, lends to SMEs in the U.S., is likely to popular with investors because of its high yield. Ranger Direct Lending (LON:RDL) is seeking to raise up to £135 Via a C-share issue, which is an additional pool of money managed separately from existing funds until…


#2

That is an incredibly high yield but I worry about how this will perform in the next downturn. I see the loans are mostly secured but even they won’t protect it from heavy losses .

You’d better hope the quality of the underwriting is superb.

The performance fee here is a real stonker. I wouldn’t mind if they guarantee to refund it if they lose money in any one year.


#3

The fees are pretty outrageous and means that whatever happens, the people who are guaranteed to make money out of this is the management. In two, three years time when there’s the next recession and loans start turning sour it’s the investors who will suffer the loses.

I’m not even tempted by this one.


#4

No profit is made without risk.

You’d want to hope the board would do their job if there were any shenanigans. if you read the original article on here from the time it IPOd you’d see the management includes people with experience in banking in America, who have years of experience lending to USA SMEs.

I missed this last time around but I’m going for it. I think the divi is amazing.


#5

Hello, I’m trying to figure out how I could invest in this but I am unsure how to go about it?

It’s for my Mother, the income part of it is perfect for her. She has a drawdown plan and I’d want to invest via that.

If she could invest perhaps £100,000 and get 9-10 yield from that per year that would be fantastic.


#6

You buy it through a stock broker or an investment platform like Hargreaves, ATS, iii, Charles Stanley etc.

Just be careful though, the 10% dividend isn’t guaranteed like an Annuity. If the economy nosedives the dividend might be cut so if your Mum depends on it she’ll be out of pocket.

Also, you need to move fast, it closes at noon on Wednesday.


#7

@peterb , I don’t know what your Mum’s overall portfolio is worth but it sounds like this investment would not leave a diversified portfolio. With just a planned 2% capital return each year if it fell, you are stuffed. A 10% income is rare and most likely risky/unsustainable in the long term IMHO. I don’t know the trust, mainly because I don’t invest in things I don’t understand or understand how they would react to macro events. This is credit and no doubt a part of a sector that banks can no longer play around in due to uneconomic capital requirements. Is it AAA quality or lower down the risk scale? - rhetorical question! Is there internal gearing of some kind? Are they going to pay out all the income or run a reserve (latter will give some dividend smoothing capability)? As @citygirl pointed out, the yield is certainly not guaranteed.
On a general point - Investment Trusts tend to burst upon the scene in a new sector with loads of new issues and then later (3-5 years) the count is significantly less. See Small Cap for an example.


#8

Oh, and I forgot to ask if this fund intends to increase the dividend. Inflation may be low now but this will not last forever and 10% now looks good but inflation will chip away at it if it is not increased above the value of inflation.


#9

I think @james_pigott has made some very pertinent points you should consider @peterb, he knows what he is talking about.

Besides moonlighting as James Bond he is I’m I right an IFA who specialises in investment trusts. You have penned some insightful pieces here before James if I am correct?


#10

Guilty on both accounts! You are very kind. I have been involved with Investment Trusts since I was 18 and that is now some 30 years! And yes, I am an adviser who specialises in ITs - both myself and my clients invest in nothing else.


#11

I’ve never met an adviser who specializes in them. I’ll look out for your articles :slight_smile: