The launch of the Innovative Finance ISA is to attract a new breed of investors into the alternative finance space, according to new findings.
Peer-to-peer business lender ThinCats has conducted some new research which reveals that 40% of everyday investors would consider investing in P2P when the new ISA product launches next April. The much anticipated advent of the new ISA was brought to light in the Chancellor’s budget back in July.
According to these latest findings the new ISA will help grow the alternative finance space by as much as a third (33%) as investors seek to utilise the tax advantages.
Currently, peer to peer is the preserve of a select number (6%) of more experienced investors. The swell in investors will lead to peer to peer loans far outstripping allocations to equities (28%) and fixed rate bonds (24%).
The main draw (55%) to peer-to-peer is the attractive returns that investors are currently receiving. Many also liked that they could readily see where their money goes towards funding (51%) and were driven by the desire to try out this new asset class (51%).
Like all types of investment there will always be some type of risk and peer-to-peer is no exception. The youth of the industry seems to be the main (44%) reason preventing people investing into the industry. Unproven track record was the second major barrier to adoption with 44% of respondents believing this provides hesitation when looking to invest.
Kevin Caley, Managing Director of ThinCats, comments:
“The findings of our research show that the industry is poised for expansion. Early adopters are still very much core to our business, but the government’s changes will open up peer to peer to a whole new audience. It is the industry’s job to manage the current concerns and communicate the huge benefits and security available for peer to peer investment.
“All ThinCats loans are secured and we have a sponsor for each auction to help investors make informed decisions. So far, we have facilitated loans of over £135 million, and it’s our aim to continue aiding significant investments to businesses and delivering 9% average returns for investors across the British Isles.”
IFAs are also seeing the positive side of the alternative finance space with 23% of investors admitting that their financial advisor has recommended peer-to-peer to them.