P2P lending or peer-to-peer lending has become a popular alternative to traditional loans and investing options.
P2P platforms and services providers cut out the middleman to connect people who need money with those who have money to invest. Its seen by banks as a disruptive model has that has been growing momentum in the last few years. (A 3 minute guide to The Peer-to-Peer Finance Association)
Recently Marshall Wace LLP the London Hedge fund that was founded by Paul Marshall and Ian Wace acquired the majority stake in lending manager Eaglewood Capital Management earlier in April this year, for those who don’t know Eaglewood is a “specialist in peer to peer” lending.
Last Friday the trust, a company managed by Marshal Wace and Eaglewood Capital “P2P Global Investments” commenced trading on the London Stock Exchange (LSE) using the ticker sysmbol “P2P”. This represents the very first entry of a listed investment vehicle offering investors the ability to participate in a pool of P2P lending loans.
P2P lending has grown dramatically in recent months in both the United States and the United Kingdom. In the UK P2P lending more than doubled, data from the P2P Finance Association show that in the first quarter P2P lending exceeded £1.2 billion, which represents, a two times increase over the previous year, and in the US companies such as Lending Club and Prosper have found their footing in a more challenging regulatory environment growing dramatically.
Lending Club has facilitated over $4 billion in loans as of Q1. The fast pace growth is indicative of a more efficient process of matching borrowers with investors, reducing costs to the platform while offering competitive rates to both parties. The traditional banking industry, normally a fairly tight and conservative business, is on the cusp of a global shift that will impact much of their business as the disintermediation takes place. The only question is to what degree the shift will impact the regular banking institutions.
In a news report the company said they would “typically seek to invest in credit assets with targeted net annualized returns of 5 to 15% with at least 85% of income distributed as dividends. The net annualized dividend yield was targeted at 6 to 8%.
Simon Champ, CEO of Eaglewood Europe, commented:
“By disintermediating the banks, peer to peer and online lending is transforming consumer and SME finance for the benefit of borrowers and lenders alike. It is now regulated in both the United States and the United Kingdom and has also received support from the British Government. Our ambition is that P2P Global Investments will be another major milestone on its road to maturity.”
Lets see if this statement holds true and if or how the banks can react to this are of business which is certainly competing with tradition loan offerings.