Peer to Business Lending
Alternative Finance Sector Report - November 2014
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PEER TO BUSINESS LENDING
ALTERNATIVE FINANCE SECTOR REPORT
PUBLISHED
November 14
AUTHOR
Luke Jackson
Samantha Goins
In the UK, hedge fund Marshall Wace
and Liberum have launched a London
listed investment trust called P2P
Global Investments, which aims to raise
£197m through its IPO. The company’s
investment objective is to provide
shareholders with attractive dividend
income and capital growth, through a
highly diversified portfolio of consumer
and SME loans originated via P2P lending
platforms. They will target an annualised
dividend yield of at least 6 to 8% per
share, payable quarterly.
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They have already entered into
agreements with Funding Circle,
RateSetter, Zopa and Crossflow Payments
to deploy capital, and will also invest
in the Eaglewood Income Fund – which
invests through Lending Club in the US.
Base fees include a 1% annual
management fee and 15% performance
fee, plus reasonable expenses, plus
an extra 0.15% for administration. To
produce a 7% net return the fund will
have to earn in the region of 10% per
year from its investments.
Institutional money flowing into this
sector undermines the concept of
P2P, and adds back in the chain of
financial intermediaries that P2P lending
platforms originally aimed to cut out.
These intermediaries all profit from the
market without exposure to losses if
loans fail.
But institutional money can have the
positive affect of growing the market for
the benefit of all investors. They raise
awareness, provide a constant stream
of capital and will help the P2P lending
market challenge traditional mainstream
lenders. However there must be a duty
on platforms to control the share of the
market of loans that institutions have
access to, to ensure that individual
lenders can continue to benefit and get a
fair deal from the market.
Looking further forward, some
speculators see the market becoming
dominated by investment banks, with
loans being securitized, hedged, traded
on secondary markets and tracked by
exchange-traded funds.
BANKS INVESTING IN P2P
SECTOR:
Santander partners with Funding
Circle to pass on leads they cannot
finance (19th July 2013)
Barclays acquires 49% of South African
P2P Platform RainFin (5th March 2014)
Westpac invests $5m into Society One
(6th March 2014)
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