Next Edge CIA Disciplined Growth Portfolio · TSX:PCD.UN
Next Edge CIA Disciplined Growth Portfolio — Next Edge Capital — Investor Presentation (December 2016)
39 slides from Next Edge CIA Disciplined Growth Portfolio's investor presentation, December 2016
Slide 1: VPC Specialty Lending Strategy
VPC SPECIALTY LENDING STRATEGY December 2016
Slide 2: Important Notes
IMPORTANT NOTES There is no guarantee of trading performance and past or projected performance is not indicative of future results. The VPC Specialty Lending Strategy (the “Strategy”) are funds which Next Edge Capital Corp. offers, or expects to offer in the future, which will obtain exposure to inv
Slide 3: Cautionary Note Regarding Forward-Looking Statements
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS The following presentation may contain forward-looking statements. All statements, other than statements of historical fact, that address activities, events or developments that Next Edge Capital Corp., Victory Park Capital Advisors, LLC or any af
Slide 4: Certain Risks of Investing in the VPC Specialty Lending Strategy
CERTAIN RISKS OF INVESTING IN THE VPC SPECIALTY LENDING STRATEGY There are risks associated with an investment in the Strategy, as a result of, among other considerations, the nature and operations of the Strategy. An investment in Units should only be made after consultation with independent qualif
Slide 5: What is Private Debt? Types of Private Debt
PRIVATE DEBT What is Private Debt? Private Debt can be broadly defined as privately negotiated loans to companies or individuals that takes place outside the traditional banking and government systems. These loans tend to have an illiquid profile as they do not trade. Typically small and mid sized (
Slide 6: Benefits of Private Debt Investing
PRIVATE DEBT: THE OPPORTUNITY Benefits of Private Debt Investing § Strong return and cash flow characteristics relative to other fixed income vehicles § Solid focus on preservation of capital § Lower leverage ratios, greater asset coverage and stronger covenant than more liquid loan market § Market
Slide 7: Breakdown of Institutional Investors in Private Debt by Type
PRIVATE DEBT: THE OPPORTUNITY Breakdown of Institutional Investors in Private Debt by Type 4% 2% Private Pension Fund 5% 5% 8% 8% Private Sector Pension Fund Foundation 8% Insurance Company 21% Fund of funds Manager 10% Endowment Plan Asset Manager 12% Family Offices 17% Wealth Manager Government Ag
Slide 8: Private Debt: The Opportunity
PRIVATE DEBT: THE OPPORTUNITY Private Debt or non-bank lending is not a new concept, however, exceptional opportunities are being created via major structural changes within the financial services industry: Regulation § New regulations (such as Basel III, Dodd Frank) have forced banks into scaling b
Slide 9: Underserved Markets Create Unique Opportunity
UNDERSERVED MARKETS CREATE UNIQUE OPPORTUNITY Non-Bank lenders are capitalizing on a trend of reduced bank lending in many markets globally to small-and-medium sized business in addition to certain consumer. U.S. Commercial Loans Outstanding, And % Small Business1 § Lending to small businesses conti
Slide 10: Significant Growth and Long-Term Sustainability
SIGNIFICANT GROWTH AND LONG-TERM SUSTAINABILITY U.S. Online Loans Outstanding ($ in Billions)1 $8.7 Online lending companies are growing fast creating a significant need for lending capital to $4.5 supply them $2.2 $0.4 $0.2 $0.8 $0.1 $0.1 $0.3 $0.5 2010A 2011A 2012A 2013A 2014A Consumer SMB Signifi
Slide 11: VPC takes advantage of both opportunities
PRIVATE DEBT: THE OPPORTUNITY There exists an opportunity to gain attractive returns by providing loans to these underserved areas of the market. Through either: 1. Providing lending capital to established alternative lending platforms; 2. Direct lending to middle market companies Victory Park Capit
Slide 12: Investment Highlights
INVESTMENT HIGHLIGHTS Experienced Management Team - Managed by Victory Park Capital Advisors, LLC (“VPC”), a Chicago-based middle market lender - The team has completed more than $4.6 billion of investments and commitments across 30 platforms in this sector1 - Key investment professionals have avera
Slide 13: Benefits of VPC Specialty Lending Strategy
VPC SPECIALTY LENDING STRATEGY Benefits of VPC Specialty Lending Strategy § Potential for gross yields and credit spreads significantly higher than high yield or bank loan investments § Unparalleled portfolio diversity by geography, borrower type, and structure § PE style in depth due diligence is c
Slide 14: About Victory Park Capital
ABOUT VICTORY PARK CAPITAL Victory Park Capital Advisors, LLC (“VPC”) § Founded in 2007 by Richard Levy and Brendan Carroll, disciplined credit investors with long tenure § A private investment firm, with a focus on alternative credit and a commitment to delivering attractive risk-adjusted returns a
Slide 15: VPC's Established Infrastructure
VPC’S ESTABLISHED INFRASTRUCTURE VPC Organizational Chart1,2 The firm has over 40 employees, with a strong sourcing, credit analysis and operations infrastructure Senior Leadership Richard Levy Brendan Carroll Upacala Mapatuna Jordan Allen Jason Brown Chief Executive Officer Senior Partner and Chief
Slide 16: Sourcing
SOURCING The Strategy will leverage VPC's reputation as a proven capital provider to non-bank lenders and its deep network of industry relationships to source attractive investment opportunities Early mover advantage and leadership position in the industry § Growing, fragmented, global industry wher
Slide 17: Value Creation
VALUE CREATION VPC has helped lending platforms accelerate value creation through funding and non- financial support, developing long-term relationships across the industry that drive ongoing investment opportunities Technology Enabled Lending Platforms Structure Guidance and Product 22 Investments
Slide 18: Structural Implementation
STRUCTURAL IMPLEMENTATION Investors expect to benefit from credit structures developed and improved by VPC Warehouse Loan Model Structured Credit Opportunities § Loans originated and retained by Platform § Lender: Square Capital § Platforms access capital through a combination of § Product: Small bu
Slide 19: Diversification and Risk Mitigation
DIVERSIFICATION AND RISK MITIGATION The Strategy seeks to generate superior risk-adjusted returns through differentiated structuring of its investments Overview Typical Credit § Privately negotiated financing agreements with non-bank consumer and small-business Enhancement at lenders Borrower “SPV”
Slide 20: Portfolio Monitoring and Risk Management
PORTFOLIO MONITORING AND RISK MANAGEMENT Each investment has a detailed monitoring program that evaluates performance and mitigates risk VPC’s team maintains a hands-on approach and frequent interaction with each platform § Weekly updates with VPC senior management on all portfolio matters § Reviews
Slide 21: Diverse Existing Commitments: Warehouse Loan Model Deals
DIVERSE EXISTING COMMITMENTS Warehouse Loan Model Deals Investment Founded Industry Geography Product Type 2014 Sub-Prime / Near-Prime Consumer U.S. Installment 2012 Near-Prime / Prime Consumer U.S. / U.K. Installment 2012 SMBs U.S. Short-Term Working Capital Advance 2009 Secured Consumer U.S. / U.K
Slide 22: Diverse Existing Commitments: Structured Credit Opportunities Deals
DIVERSE EXISTING COMMITMENTS Structured Credit Opportunities Deals Investment Founded Industry Geography Investment Type Product Type 2009 Healthcare U.S. Term Loan Accounts Receivable 2012 Near-Prime / Prime Consumer U.S. / U.K. Whole Loans Installment and Line of Credit Sub-Prime / Near-Prime Seni
Slide 23: Strong Investment Track Record
STRONG INVESTMENT TRACK RECORD The VPC Specialty Lending Program Portfolio1 has made approximately $4.6 billion of investments and commitments across thirty specialty finance platforms since 2010 VPC Specialty Lending Program Summary Historical Performance 2,3 From the period spanning July 28th, 201
Slide 24: Case Study: Fundbox Ltd.
CASE STUDY Fundbox Ltd. Business Description Investment Thesis Fundbox Ltd. (“Fundbox”) is the leading platform for small and § Deal structure contains significant downside protection via medium-sized businesses to manage and optimize cash flow. conservative advance rate against a diversified, short
Slide 25: Case Study: Square Inc.
CASE STUDY Square Inc. Business Description Investment Thesis Square Inc. (“Square”) provides loans to small and medium sized § Extensive database of merchant data and proprietary analytics businesses processing credit card payments via Square. Square is provides platform with the ability to appropr
Slide 26: Key Takeaways
KEY TAKEAWAYS VPC is a known leader in the non-bank financial services industry with deep institutional ties 1 to a diverse set of established platforms and to the VC's that are funding emerging platforms Second half of 2015 and first half of 2016 presented a disconnect between the performance 2 of
Slide 27: Conclusion
CONCLUSION Market Opportunity Remains Attractive – Continued rapid expansion Attractive Returns – Target 8.0% net dividend yield and 10% net total return (once fully invested) Access to Lenders – Scalable access to online lending platforms utilizing VPC’s infrastructure Diversity of Assets – Geograp
Slide 28: Appendices
APPENDICES
Slide 29: Historical Performance: VPC Specialty Finance Fund I, L.P.
HISTORICAL PERFORMANCE VPC Specialty Finance Fund I, L.P. As of September 30, 2016 Investment Name Initial Inv. Exit Date Firmwide Gross Gross Capital Realized Return Unrealized Return Total Return Gross IRR Date Capital Invested Invested Active Deals Applied Data Finance, LLC 3/25/2015 $ 25,400,000
Slide 30: Notes Related to Performance
NOTES RELATED TO PERFORMANCE The performance on the previous page and page 2 is shown for the VPC Specialty Finance Fund I, L.P. Past performance is not indicative of future results. No assurance can be given that the investment objective will be achieved or that an investor will receive a return of
Slide 31: VPC Executive Board
VPC EXECUTIVE BOARD VPC has built a top-tier Executive Board comprised of prominent investment and industry professionals Former U.S. Senator Joseph Lieberman (Chairman) Former United States Senator Joseph I. Lieberman and 2000 vice presidential candidate spent 40 years in elected office including 2
Slide 32: VPC Senior Team Biographies: Leadership
VPC SENIOR TEAM BIOGRAPHIES Leadership Richard Levy, CEO and Founder Richard Levy is the CEO and founder of VPC. He oversees the firm’s investment and operational activities. Mr. Levy is also the chairman of the firm’s management and investment committees. Mr. Levy serves as chairman of the board of
Slide 33: VPC Senior Team Biographies: Leadership
VPC SENIOR TEAM BIOGRAPHIES Leadership Upacala Mapatuna, Chief Investment Officer Upacala Mapatuna joined VPC in 2016 and is the chief investment officer. Her responsibilities include overseeing the firm’s credit and equity investment activities, as well as sourcing, evaluating and executing private
Slide 34: VPC Senior Team Biographies: Senior Investment Professionals
VPC SENIOR TEAM BIOGRAPHIES Senior Investment Professionals Gordon Watson, Partner Gordon Watson joined VPC in 2014 and is a partner. He is primarily responsible for sourcing, analyzing, executing and management of direct private debt and equity investments in the non-bank financial services sector.
Slide 35: VPC Senior Team Biographies: Senior Investment Professionals
VPC SENIOR TEAM BIOGRAPHIES Senior Investment Professionals Zhengyuan Lu, Principal Zhengyuan Lu joined VPC in 2016 and is a Principal. He is primarily responsible for sourcing, analyzing, executing and management of direct private debt and equity investments within the specialty finance sector. Pre
Slide 36: VPC Senior Team Biographies: Legal, IR & Operations
VPC SENIOR TEAM BIOGRAPHIES Senior Legal, Investor Relations & Operations Professionals Jeffrey Schneider, Chief Financial Officer Jeff Schneider joined VPC in 2010 and is the chief financial officer. He oversees the accounting, tax, finance, treasury and fund operations of the firm and assists in t
Slide 37: VPC Senior Team Biographies: Investor Relations
VPC SENIOR TEAM BIOGRAPHIES Senior Investor Relations Professionals Ron Rolighed, Principal Ron Rolighed joined VPC in 2015 and is a principal. He is primarily responsible for new business development, investor relations, and client servicing. Mr. Rolighed is also involved in developing new investme
Slide 38: Historical US Credit Card Yields
HISTORICAL US CREDIT CARD YIELDS US Consumer Finance Yields Resilient Through Cycles US Credit Card Net Yields1 20% 16% 12% 8% 4% 0% 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 Net Yields Charge-offs Average Net Yield Using unsecured consumer credit cards as a proxy, net yields continued to re
Slide 39: Comparison: VPC Specialty Lending Strategy vs. High Yield vs. Loan Fund
COMPARISON: VPC SPECIALTY LENDING STRATEGY VS. HIGH YIELD VS. LOAN FUND VPC Specialty Lending Strategy High Yield (“HY”) Fund Loan Fund • VPC performs in depth, “private equity-style” due • Fund manager performs basic, fundamental • Fund manager performs basic, fundamental Due diligence diligence on
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