Institutional Investors Increase Presence in Marketplace Lending Space

The second annual survey by Richards Kibbe & Orbe and Wharton FinTech reveals that half of all institutional investors surveyed hold investments in marketplace lending.

Global law firm Richards Kibbe & Orbe and Wharton FinTech – a firm focusing on education, career development and idea promotion in FinTech – today released their second annual survey on the marketplace lending industry, entitled: “2016 Survey of U.S. Marketplace Lending”.

The two companies surveyed more than 300 US institutional investors. Approximately 16% of those surveyed work for firms with $10bn or more in assets under management (AUM), 36% work at funds with more than $1bn in AUM and 47% are at funds with less than $200m in AUM. 82% of respondents defined themselves as somewhat or very familiar with marketplace lending – up from 75% last year – showing an increased familiarity with the industry. 

    ^{Source: 2016 Survey of U.S. Marketplace Lending}

The report points to a general solidifying of confidence among investment funds. The optimism surrounding the space appears to be following an upward trajectory, with more than 80% of respondents expressing a positive outlook, up from 71% last year. This comes despite widespread qualms about the performance of the asset class. Moreover, the institutional investors surveyed appear to have increased their investments in the sector over the past year. Half (50%) of all the investors surveyed have some form of investment in marketplace lending, up considerably from the 2015 figure, which was below 30%.

Richards Kibbe & Orbe partner Scott Budlong offered comment:

“Institutional investors are right to identify potential regulatory developments as a key factor in the industry’s continued growth, which means they will want to arm themselves with better knowledge about the evolving regulatory framework,”

The survey also honed in on other industry issues, revealing some key findings:

• More than 72% of respondents believe that the marketplace lending industry is somewhat or very likely to consolidate in the foreseeable future.
• The most popular asset classes amongst institutional investors are unsecured consumer, small business and real estate loans.
• The primary risks in the industry at present are borrower quality, market-wide credit risk and regulatory risk. 

^{Source: 2016 Survey of U.S. Marketplace Lending}

Steve Weiner, co-founder of Wharton FinTech, also weighed in:

“Our second survey gives us a chance to compare data with last year’s baseline. We predicted that the views and actions of institutional investors toward this nascent industry would change rapidly, and this year’s results bear that out.”

The research concludes with some broad-brush forecasts about the future of marketplace lending:

• Platforms will continue to explore more niche markets in an effort to avoid competition from established players.
• There will be a greater integration between platforms and banks.
• There will be significant regulatory developments over the next year.
• There will be greater interest among investors in secured consumer loans, such as home mortgage loans or refinanced auto loans.

You can access the full report here.