ALTFI EUROPE SUMMIT 2016
HOSTED AT THE BREWERY, CITY OF LONDON
TUESDAY 22ND MARCH 2016
WELCOME TO OUR 2016 EUROPE SUMMIT REVIEW
Firstly, a huge thank you to all those who attended and supported the AltFi Europe Summit 2016!
The event brought together platforms and industry participants to discuss themes including the alignment of interests between platforms and lenders and the future of the industry in terms of both regulation and product innovation.
Looking ahead: The challenges and opportunities for marketplace lending
Samir Desai (Funding Circle)
Samir Desai, Funding Circle CEO, highlighted the platforms’ global approach aswell as future plans. After their acquisition of Zencap in October last year, and their US launch in autumn 2013, Samir highlighted Funding Circle's impressive global footprint. He also illustrated the significant evolution in their credit process showing cumulative loss rates dropping year by year from 5%+ to sub 1%. Samir addressed recent sector challenges and concluded that if the industry could retain a relentless focus on delivering value as it scales up then it would enter a new golden age.
Regulating Europe: Implementing a framework for growth
Niall Bohan (European Commission)
Niall Bohan, Head of Unit, Capital Markets Union (European Commission), talked about the intention of regulators in Europe to implement a solid framework for growth.
"Marketplace lenders do not need to take balance sheet risk" - Debate
Rhydian Lewis (RateSetter) vs. Rob Young (OnDeck)
Rhydian Lewis from RateSetter and Rob Young from OnDeck debated the need for marketplace lenders to take balance sheet risk. Rhydian argued that marketplace lenders don’t need to offer capital as skin in the game because transparency can provide adequate alignment. On the other hand, Rob agued that marketplace lenders need to take risk with their own capital, to mitigate any agent/principal conflict.
Can institutional investors still generate alpha in the peer-to-peer lending space?
Simon Champ (Eaglewood Europe), Madelyn Puente (MarketInvoice), Jean-Benoit Gambet (Eiffel eCapital), Christian Faes (LendInvest), Stuart Law (Assetz Capital)
This panel – comprising both institutional investors and representatives from platforms such as MarketInvoice, LendInvest and Assetz Capital – focused on the ability of institutional investors to generate alpha (extra returns) in the peer-to-peer lending space. The debate explored whether alpha can be created using active loan selection and what other strategies might be used to generate out-performance.
The advent of securitisation in European marketplace lending
Samir Desai (Funding Circle), Partel Tomberg (Bondora), Andreas Wilgen (Fitch Ratings)
Bondora, Funding Circle and Fitch Ratings outlined the securitisation phenomenon in the European marketplace lending space. The debate explored why securitisation in the P2P space might differ from mainstream ABS structures due to differences in the nature of the underlying origination. Participants also touched on different investor preferences for accessing underlying loan assets aswell as the importance of technology, data and under-writing standards. The panel all indicate that we should expect to see a securitisation of European P2P assets by the end of 2016.
The mechanics of M&A
Matthias Knecht (Funding Circle EU), Ravi Anand (ESF Capital)
Matthias Knecht from Funding Circle EU and Ravi Anand from ESF Capital outlined the dynamics of mergers and acquisitions in the peer-to-peer lending space. The panellists agreed upon the importance of scale for peer-to-peer platforms. Scale might be achieved unsing various channels, such as partnerships, taking stakes in other platforms, acquisitions or through a franchising model which might also involve some technology outsourcing.
Matthias from Funding Circle believed that platforms can reduce regulatory risks, counterparty risk and time-to-market if they choose to acquire other companies. Ravi from ESF agreed. It emerged from the discussion that the two main variables that platforms need to consider when planning an acquisition are geography and product.
"The Innovative Finance ISA will be a boon to
retail investors" - Debate
Andrew Lawson (Zopa) vs. Jake Wombwell-Povey (Goji)
The two participants in this debate – Andrew Lawson from Zopa and Jake Wombwell Povey from Goji – agreed that the new Innovative ISA would not have a revolutionary impact but that there would be incremental increases in flow. Andrew worried that many platforms might not have the capacity to cope with drastic increases in demand while Jake emphasised the need to get adviser focused platforms to include the new ISA in their product set.
Do fund structures offer higher net returns than direct peer-to-peer investment?
Rupert Taylor (AltFi Data)
Rupert Taylor from AltFi Data began by explaining that transparency is the key differentiator of market-place lending versus what preceeded it i.e. bank lending. He went on to explain that impressive disclosure was the ‘skin in the game’ that created an alignment between the interests of on platform investors and the platforms themselves and that higher levels of transparency had fuelled faster growth by attracting investor assets.
He then demonstrated that funds have delivered impressive NAV returns versus what a ‘benchmark’ return would suggest that investors may have achieved by going direct. However the share prices of these funds had not kept pace with that NAV growth resulting in losses for investors. He then explained, using P2PGI as an example, that the NAV growth of these funds could now be expected to accelerate and that they should increasingly out-perform the industry bench-mark over time. Finally he suggested that the funds could highlight this out-perfomance, and demonstrate their accountability, by formally benchmarking their performance. Doing so could result in a removal of the discount that their shares are trading at relative to NAV.
Opening up access to offline loanbooks
Guest moderator: Stephan Wilcke (Rozes Invest), Paul Mildenstein (Liberis), David Goldin (Capify), Christoph Rieche (Iwoca)
In this panel – moderated by Stephan Wilcke from Rozes Invest –representatives of three small business balance sheet lenders (Liberis, Capify, Iwoca) explained how investors can access offline loanbooks through balance sheet lending models.. The three panellists focused on their distinct business models , describing their companies and analysing the differences between pure marketplace lenders and balance sheet lenders. Lastly, they discussed regulatory issues.
Product innovation spotlight
Christian Faes (LendInvest), David Hanf (Smava), Robert Stafler (Fintex Capital), Rory McHugh (RBS)
In this panel, representatives of LendInvest, Smava, Fintex Capital and RBS discussed innovation in the alternative finance space. Key questions included: Where will innovation come from? The importance of technology? Why origination is so important? The possible impact of Securitisation? Fintex Capital explained how their newly launched product could open up access to p2p loans via a new institutional friendly wrapper.
"Early stage equity is not an appropriate asset class for retail investment" - Debate
Julia Groves (UKCFA) vs. Gadi Mazor (OurCrowd)
Julia Groves from UKCFA and Gadi Mazor from OurCrowd participated in an excellent discussion regarding the suitability of crowdfunded equity to retail investors.
Price discovery in equity crowdfunding
Guest moderator: Rupert Taylor (AltFi Data), Darren Westlake (Crowdcube), Goncalo de Vasconcelos (SyndicateRoom), James Codling (VentureFounders)
Rupert Taylor from AltFi Data moderated this panel – composed of representatives from three of the leading equity crowdfunding platforms in the UK. The discussion attempted to identify whether or not the crowd were accepting sensible valuations for start-up equity investments and if they were not how the process might be improved.
New horizons: Benchmarking, data repositories and beyond
Anil Stocker (MarketInvoice), Daniel Gandesha (Property Partner), Rupert Taylor (AltFi Data), Cormac Leech (Liberum)
The last panel focussed on wrapping up the key points of the day and tried to forecast what is going to happen next. Benchmarking, data repositories, student loans and other themes are discussed by two representatives of the UK alternative finance space (MarketInvoice, Propery Partners) as well as by two industry data providers (Liberum, AltFi Data).