New institutional investor to fund £1bn of UK loans through Funding Circle

The deal will see another US-based asset manager invest a substantial amount in lending through Funding Circle’s platform.

Funding Circle and Waterfall Asset Management, a US-based institutional investor focused on structured credit, have entered into a strategic partnership that will see the latter invest in £1bn of loans originated through Funding Circle’s UK platform over the next two years period. Waterfall’s investment will be partially financed by Deutsche Bank.

Waterfall was founded in 2005 by Tom Capasse and Jack Ross, who started the ABS Group at Merrill Lynch in the 1980s and conducted the first ABS issuances for many of the more than 40+ ABS sectors in which Waterfall invests. Waterfall has approximately $7.3bn in assets under management.

The firm's move comes just three months after Alcentra, part of BNY Mellon agreed to purchase $1bn of loans from the peer-to-peer lending platform’s US operation. It also joins, aside from 85,000 individuals, a growing number of larger investors lending to small businesses through Funding Circle including the British Business Bank, the European Investment Bank and other financial institutions, including pension funds and insurance companies.

Today’s announcement follows a record quarter for group originations, with Funding Circle facilitating £564m to small businesses in the third quarter of the year across its four markets, including £377 million in the UK, the firm said in a statement.

Samir Desai, Funding Circle co-founder and CEO, says the firm is increasingly seeing substantial commitments from investors looking to purchase loans in each of our geographies.

“Our business model has opened up small business lending as an asset class for the first time, allowing investors such as individuals, asset managers, insurers, and government entities to earn attractive, risk-adjusted returns by lending directly to businesses”.

Henrik Malmer, Managing Director at Waterfall, said says the firm’s investment in SME loans in the UK stems from this market being underserved by traditional lenders.

“Funding Circle’s platform and technology provides borrowers access to credit whilst allowing investors such as Waterfall to diversify their portfolios into an interesting and exciting asset class."