BUZZ-Funding Circle shares fall as SME income fund to be liquidated

(Corrects headline as fund is listed on main market, not AIM)

** Funding Circle shares down 7 pct after company says plans to close its listed fund Funding Circle SME Income Fund after just over three years

** Analysts say fund which provides loans to small businesses in UK, U.S., Germany, and the Netherlands struggled with rising hedging and financing costs

** FCIF board has proposed an EGM to decide on possible liquidation after shareholder consultation indicated a preference to stop investments in new loans and return capital

** Funding Circle says fund has become smaller part of overall funding mix and was projected to fund only 3.5 percent of its origination volume in 2019

** If fund winds down, investors will get their money back as small business owners pay their loans back

** Funding Circle said in statement it will launch single-currency private funds which are lower cost to invest in small business loans in Germany, the Netherlands and UK

** Fund's main-market listed shares are down 16 percent from their level at IPO in Nov 2015

** "The decision to return capital is ultimately a consequence of poor credit performance in the portfolio mainly related to UK loans," write Liberum analysts

** Liberum estimates impairments of 7.7% to date in FY2019, in addition to a further 1.9% from IFRS 9 provisions

** "The structural problems with the fund means that a wind-down feels like the best result for shareholders," write Jefferies analysts

(Reporting by Helen Reid)