LendInvest, the UK’s largest property-focused online lender, is refocusing and restructuring its investment platform. The firm is shutting out retail investors with the introduction of a qualification test, which investors will have to pass in order to lend through the platform.
The test closely mirrors the kind which investors must pass in order to invest via most investment-based crowdfunders – which typically specialise in equity or bond investments. But LendInvest boss Christian Faes (pictured) tells us that LendInvest’s test will be more rigorous.
Faes doesn’t anticipate a substantial change in the firm’s investor base to stem from the change. He estimates that around 90 per cent of the platform’s active investors will pass, and expects the proportion of funds on the platform that will remain eligible to invest to be higher still. The average balance for individual investors on the LendInvest platform is roughly £30k.
Investors who fail the test will not be able to invest via the platform. This applies to both new and existing investors. Existing investors who fail will continue to earn interest on outstanding loan contracts until maturity.
Asked whether this means that LendInvest is bowing out of the race to get fully authorised as a peer-to-peer lender, Faes said not necessarily. LendInvest’s application is still out with the FCA, and the firm may reconsider its stance on retail money if its authorisation comes through. The lure of the Innovative Finance ISA – which may only be offered by fully authorised firms – seems to have dissuaded Faes from turning his back on retail money indefinitely.
In addition to the change of demographic, the process of investing will be changing for individual investors. Henceforth, every loan that is listed on the platform will be legally structured as a fund, which Faes says is a “very robust, regulated structure”, that ticks all the boxes. These funds are not special purpose vehicles.
“An investment into one of our loans is now an investment into an alternative investment fund. Each loan is, in effect, a fund,” explained Faes. “All these funds are managed by LendInvest under our FCA permissions as an alternative investment fund manager.”
“It's good for us, operationally, since alternative investment funds are what we've been doing for years. The revised structure fits in nicely with what we already do and we're well established in the fund management space. From a practical point of view, our investors won't notice much difference at all. Having confirmed their eligibility, they'll need to agree to revised documentation before making their next investment; after that the experience is unchanged.”
LendInvest loans have to date been funded by a mix of institutional, sophisticated and retail investors. In addition to its online platform, the firm also manages a pair of pooled investment funds, based in the UK and Luxembourg, which Faes said might be made accessible to online investors in the future. These vehicles have proven especially popular with overseas investors.
LendInvest is right on the cusp of crossing the £1 billion mark in cumulative loan originations – a feat that has been accomplished by just four UK-based marketplace/online lenders to date.
