Fund Managers may be among the greatest beneficiaries of the peer-to-peer lending phenomenon in the not so distant future.
Lee Robinson, celebrated fund manager and Founder of Altana Wealth, considers the p2p sector to be both an enticing opportunity and a very serious threat to the traditional banking system. Speaking at the GAIM Conference in Monte Carlo, Robinson said:
“P2P lending, as it is all done through computers, is far more efficient for the customer in terms of obtaining a loan than going to a bank. It also presents a huge opportunity for fund managers.”
The peer-to-peer sector is undoubtedly the fastest growing sub-sector of the alternative finance world. AltFi Data recently reported that the UK space had shot past the £1.5 billion mark, after growing a staggering 50% in just 5 months. But p2p lending remains a very young space – which may serve to instil wariness among any fund managers currently sizing it up. With the exception of Zopa (founded in 2005), no platform has yet been through a full business cycle. On-going developments such as the P2PFA’s newly enforced standardized default calculation methodology are all part of the maturation process, but there remains significant progress to be made.
Mr. Robinson echoed such concerns in Monte Carlo:
“My biggest concern at the moment is that P2P seems to be too easy, and there is a risk that everyone will end up chasing margin and it becomes a loss-leading margin. I suspect P2P is slightly mispriced at the moment because all of the data we have on P2P is only from 2009. When we get greater volumes of loans, and higher default numbers, we will get a better picture. Firms must be long-termist in their approach though. However, P2P lending does offer an enormous opportunity.”
Of course, Marshall Wace has already made its move into the p2p space – acquiring the US-based Eaglewood Capital Management in order to create P2P Global Investments. The investment vehicle recently raised £200 million by listing on the London Stock Exchange – funds which will be invested into loans through a number of p2p providers. The confirmed recipients are – perhaps unsurprisingly – Zopa, RateSetter and Funding Circle. The fund will target an annualized dividend yield of at least 6% to 8% of the issue price per share, payable quarterly. Simon Champ, CEO of P2P Global Investments, commented:
"P2p lending is an exciting new asset class for fund managers. The assets are particularly attractive given their short duration, amortization, high quality borrowers, and premium yield. The issue previously has been whilst these loans have existed, access to them has been monopolized by the high street banks. P2p lending changes that."