US Platform Fund to List in the UK?
Prepare yourself for some speculation. We’re reading in the tea leaves that one of the US’ largest marketplace lending platforms might be gearing up to launch an investment trust on a UK stock exchange.
Rumours have surfaced amongst a group of institutional investors that are already shareholders in the likes of P2PGI that a US platform fund is coming to UK shores. Such institutions stand out as a natural target for any platform looking to launch a fund of its own, they being already familiar with the asset class.
Obvious candidates in the US include Lending Club, Prosper, SoFi – or perhaps a left field platform like OnDeck, which runs an institutional sales programme alongside its balance sheet lending operation.
Specifics on the size, fee structure, risk/return profile and so on are not available at this stage in proceedings. Were such a vehicle to materialise, we would expect the return on offer to exceed the return delivered by UK-based marketplace lending platforms. But the risks are typically higher in the US too, due to the average creditworthiness of those lent to (SoFi notwithstanding). Now might be an especially interesting time for UK-based institutional investors to look at a platform-linked fund in the US, as rates of return in the US marketplace lending sector appear to be rising. The Wall Street Journal recently reported on Lending Club’s decision to raise interest rates for new loans in response to the Fed’s rate hike. It’s likely that a range of platforms will follow suit, if they haven't already.
Previous iterations of platform-linked funds in the UK include the Funding Circle SME Income Fund – which successfully raised £150m in November 2015. LendInvest is sizing up the launch of a similar vehicle, which is expected to list later this year.
Enlarging the geographical appeal of the US marketplace lending asset class makes a great deal of sense. The US sector offers the promise of vast swathes of liquidity, with at least three platforms having long since crossed the $5bn mark in cumulative lending. Though UK lending volumes are growing rapidly, the sector's largest three platforms have nonetheless combined to lend less to date than Lending Club alone.
Rarely is there smoke without fire. We’ll keep an ear to the ground for details.