Australian Investors Interested in US P2P
Australia is quickly becoming one of the top global destinations for the financial technology industry.
Now Australian investors are even looking abroad for new opportunities in fintech.
The first of its kind in the country, an Australian fund has been investing in peer-to-peer (P2P) loans in the United States.
The move by major investment funds to include P2P loans as part of their portfolios gives testament to the rise of the P2P lending industry.
Global Credit Investments, created by former managing director at Goldman Sachs Steven Sher and former Bain & Co consultant Gavin Solsky, has invested close to AU$10 million in P2P loans in the US so far.
The fund purchases loans from P2P lenders such as Lending Club and Prosper and has created its own algorithm for underwriting and risk management.
“We have come up with our own algorithm, which says ‘Yes, we think the underwriting processes of these platforms is robust because they have been going for a long time, but we think we can cherry pick what we think are the best loans’,” said Solsky.
The fact that traditional investment funds are moving into P2P loans is an interesting development. Marketplace lenders grew in popularity because they offered individual investors are opportunity to have access to the loan market as an investor.
Now that traditional funds are moving into the sector, the industry may begin to chance. But this is not necessarily an entirely bad development.
Considering the infancy of the P2P lending scene and the subpar credit score analytics, traditional investment funds may be able to offer some guidance.