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AltFi Fintech Index: A merry (8.6%) month of May

After three consecutive monthly falls, the AltFi Fintech Index bounced in May.

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The AltFi Fintech increased 8.6 per cent during the month of May, bucking a three-month-long losing streak and substantially outpacing the MSCI World Index’s 0.92 per cent fall.

The index is made up of 47 constituent publicly listed companies, all ‘pure play’ fintech scaleups and disruptors.

Just under two-thirds of the total companies made a positive return during the month, which was characterised by some big moves upward for some of the names.  

Just under half (19) of these firms jumped by double digits. And one by triple digits.

Upstart, an AI lending platform, was the month’s big mover. 

The fintech partners with banks and credit unions, typically to provide consumer loans through alternative data and AI-based underwriting.

It soared 109 per cent during May after the US-based company revealed a deal struck with investment firm Castlelake to fund $4bn of lending.

The company had been one of the casualties of 2022, losing nearly 90 per cent of its value since a peak in late 2021.

​​"Against a backdrop of increasing economic uncertainty, Castlelake is committed to helping support Upstart's mission of unlocking mobility and opportunity for millions of U.S. consumers," said Castlelake’s John Lundquist.

"Upstart is excited to collaborate with a firm that we believe is an experienced and dependable capital provider through economic cycles," added Sanjay Datta, CFO of Upstart.

"Castlelake's support will help ensure we have the resources to continue scaling the deployment of our AI models and expanding access to affordable credit for all consumers."

Other big movers upward during May were Opendoor (78.3 per cent), Blend Labs (67.4 per cent), Lemonade (61.7 per cent) and Affirm (49.5 per cent).

Opendoor, a San Francisco headquartered digital platform for residential real estate, continues to be a volatile stock. It made 22.8 per cent in the month of March following a 40 per cent plunge in February, for example.

Two the index’s largest holdings were also huge winners in the month. Shopify, which makes up 7.9 per cent of the index making it the largest holding soared 20.1 per cent in the month. 

Nubank, which is the third largest holding at 6.3 per cent of the index, gained 30.8 per cent after it recorded a tasty $141m profit for the first quarter of 2023 as well as seeing its Brazilian market share nears 50 per cent, meaning nearly half the Brazilian adult population have an account with Nubank.

“In Brazil, 46 per cent of the adult population is a Nubank customer, a figure that has doubled in only two years,” said Nubank’s CEO and founder David Vélez.

“With an efficiency ratio of 39 per cent, we are one of the most efficient players in Latin America. We have an exceptional capital position and excess liquidity, operate a low-cost platform, and continue to increase our product portfolio and customer engagement.”

Payoneer was May’s biggest faller, dropping 24.2 per cent. The company exceeded revenue expectations but missed earnings per share expectations.

A tech lead

Tech has been one of the weaker areas of the equities market over the past few years, with listed fintech stocks some of the harder hit. 

Analysts at Schroder's note, however, that while global shares fell during  May, tech got a boost as enthusiasm over AI helped lift stock prices.

“Fervour around artificial intelligence and the potential for a boom in related technology drove chipmakers, in particular, higher.”

Schroders' Simon Webber further notes that tech is seeing a turnaround also owing to a bout of cost-cutting improving margins.

“There is lot of potential to take out costs in those companies following the huge hiring spree of the previous three years. This could be either through headcount reductions and in some cases by reducing the compensation paid to some of the expensive talent they have as the labour market softens,” he said.

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