Institutional Money Floods Into Kiwi P2P Space

By AltFi on Friday 24 October 2014

Alternative Lending

The first fully regulated P2P platform in New Zealand – Harmoney – has secured a $50 million investment from Blue Elephant Capital Management.

Blue Elephant is one of the four major institutional investors that will provide the young platform with around $100 million of lending capital. Blue Elephant is the second institution to publicly announce its participation in the deal. The first was Heartland Bank. The bank also took a 10% equity shareholding in Harmoney in September. The other 2 investors are from overseas but so far have chosen not to be named.

Blue Elephant was founded just last year by fixed income trading and credit specialists Ashees Jain and Joseph Marra – with the goal of focusing on the intersection between technology and finance.

Jain commented that New Zealand has a solid borrower history and a banking system "in need of well-priced capital."

“We are constantly seeking to expand our portfolio of P2P lending platforms into new markets, like New Zealand, where there is solid borrower history as well as a banking system that is in need of well-priced capital.”

“We are thrilled to be the first institutional funder of a P2P platform in New Zealand. As the only licensed P2P platform in New Zealand, Harmoney fits our strategy to build a diverse portfolio with exposure to multiple economies and business cycles."

Neil Roberts, CEO and founder of Harmoney, weighed in:

"They're starting off on their journey (and) they've just got a rock star from BlackRock. I've no doubt that he will attract a lot of fixed-term investment capital. It (the deal with Blue Elephant) is great from our point of view because we've picked someone who can grow with us. They're small now but they're growing quickly and we hope to as well."

Recently, Brian Weinstein, a former head of fixed income at BlackRock where he managed more than $300 billion of assets, joined Blue Elephant as a managing partner.

A high proportion of investment in the platform, two-thirds, comes from institutions. This echoes the situation in the US, where in the biggest P2P platforms have up to 80% of loans funded by institutional money. In the UK we haven’t seen the same amount of institutional capital flowing into the platforms. Today’s news suggests that the fledging New Zealand market is developing in the mould of the US market, with the bulk of funding coming from large corporations.

Blue Elephant has indicated that it has agreements in place to invest more than $300 million across 6 different online lending platforms before the end of 2015. The firm also has a fund, the Blue Elephant Offshore Consumer Fund, which enables non-US investors to invest in the US peer-to-peer lending space.

At the end of September Harmoney announced that it had lent $2 million to date and aims to lend more than $100 million in its first year. This would be an ambitious target for any young platform but it is particularly ambitious for a young platform in such an early-stage market. Harmoney only launched at the beginning of September and is New Zealand’s first licensed peer-to-peer lender. At the time of the launch Neil Roberts commented:

“New Zealanders have the potential to benefit enormously from this asset class, which for the first time is available to retailer investors. We couldn’t be more excited to lead the charge, shaking up the market with a competitive and technologically advanced investment and lending platform.”

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