P2P investors to outperform cash deposit holders
Peer-to-peer investors will see their returns outperform cash deposit holders even as the base rate rises, one industry expert has claimed.
Cormac Leech, founder and chief executive of AxiaFunder, said that despite record-breaking increases in the base rate, he does not expect banks to fully pass on these rate rises to savers.
The top-paying savings accounts in the UK are currently hovering around the five per cent mark, but in order to access these returns, savers must commit large sums of money and lock it away for set periods of time.
Meanwhile, many P2P lending platforms are offering double-digit returns, with minimal investment thresholds and liquidity available via secondary markets.
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Leech added that tighter regulation of the P2P market means that platforms are likely to generate better results currently compared to five or 10 years ago.
“Equity markets continue to look expensive while bond rates are negative after adjusting for inflation,” said Leech.
“P2P investing and direct credit lending products are some of the few areas likely to generate positive inflation-adjusted returns over the next 12 to 36 months.
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“P2P investors are likely to outperform cash deposit holders as banks fail to fully pass on interest rate increases to deposit holders.”
Leech added that litigation funding is likely to perform relatively well, due to its limited correlation with economic fluctuations.
AxiaFunder specialises in litigation funding. The platform has reported a 100 per cent success rate to date, with an internal rate of return of 45 per cent.
“AxiaFunder has seen continued good investment demand despite the recent fluctuations in equity and bond markets,” Leech added.
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