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Prospect Capital Reports Strong 4Q15 Operating Performance

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Part 4
Prospect Capital Reports Strong 4Q15 Operating Performance PART 4 OF 7

Where Prospect Capital Is Investing to Increase Growth

Focus on controlled investments

Prospect Capital (PSEC) announced that as of June 30, 2015, its controlled investments stood at 29.9% of its total portfolio, up from 27.7% as of June 30, 2014. The company has made three controlled investments, each over $100 million. Prospect Capital has selectively monetized its controlled positions when it has found attractive pricing. Subsequently, it has deployed the proceeds into new, attractive opportunities yielding higher returns at lower risk.

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Prospect Capital is deploying investments for the online lending industry, with a focus on near-prime, prime, and subprime consumers as well as small business borrowers. The company generated 19% of its origination as of June 30, 2015, through online lending.

During fiscal 2014, the company entered the online lending industry jointly with National Property REIT Corp. Its total business currently stands at ~$243 million across multiple third-party and captive origination and underwriting platforms. The business currently delivers an expected levered yield of ~18%. The company has closed three bank credit facilities and one securitization to enhance its returns. It’s also focusing on diversifying origination sources for its online business in order to generate more leads.

Consumer credit, real estate

Prospect Capital has a positive outlook for consumer credit throughout 2015 on the back of declining unemployment rates and commodity prices. The company’s financial services holdings are returning an annualized yield of 18% to 30%, reflecting strong demand for consumer credit.

The company has also made multiple investments in the real estate arena with its private REITs. The investments are focused on multi-family stabilized yield acquisitions with attractive tenure financing. The company’s portfolio is benefiting from an improved housing market, increased rents, and higher occupancies.

Earnings per share growth in the investment management space

  • CIT Group (CIT): 78%
  • American Capital (ACAS): 157%
  • United Rentals (URI): 33.81%

Together, these companies form 2.04% of the PowerShares Global Listed Private Equity Portfolio (PSP).

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