Augmentum Fintech is anticipating a “healthy correction” in entry prices to boost its portfolio after suggesting other institutional investors have overpaid to enter the market.
Tim Levene, chief executive of the alternative finance-focused investment trust, has revealed the challenges of finding new opportunities in the current environment.
“Over the last 12 months our challenge has been finding opportunities where the entry price ultimately rewards us in time for the risk we are willing to take,” he said.
“There has been a slew of new investors in the fintech space, many of whom were prepared to pay any price to build exposure.
“We are starting to see some of this money leave the sector which will continue to lead to a healthy correction in entry prices later this year and beyond.
“We must remain disciplined on price while continuing to deliver advantaged deal access for our shareholders. Our dictum holds that not every good business is a good investment.”
Levene said the quality of opportunities in Augmentum’s pipeline remains high but the pace of investment has slowed.
It invested £16.4m in the second half of 2021 compared with £44.4m in the first six months.
“Our belief in the potential of the sector remains as strong as ever, yet our investment bar must remain high,” he said.
“Our central thesis of investing only in areas of high conviction and/or secular trends in consumer behaviour will continue to dominate our decision making.”
It comes as Augmentum Fintech reported that its net asset value (NAV) per share after performance fee increased by 19 per cent to 155.2p in the 12 months to 31 March 2022, up from 130.4p a year before.
The return on capital invested is now 22.6 per cent, up from 19 per cent in March 2021.
Augmentum Fintech said its top 10 holdings, which includes former peer-to-peer lender Zopa, grew at an average of 96 per cent annually and have an average of 17 months cash or are profitable.