AxiaFunder chief calls for “self-policing” of alternative finance
AxiaFunder chief executive Cormac Leech has said alternative finance requires more self-policing by commercial ratings platforms to enhance its potential for retail investors.
His comments come after the platform celebrated winning Innovative Lender of the Year at Tuesday night’s inaugural Peer2Peer Finance Awards.
Leech suggested that commercial ratings platforms such as 4th Way could run a monitoring subscription service for investors to access detailed due diligence on each platform. “Normally the platforms pay for these rating reports which leads to conflicts of interest,” he said.
He said such a service would give retail investors the kind of detailed due diligence benefits that are currently only available to institutional investors.
“This would take some of the pressure off regulators who are trying to protect retail investors from losing money in alternative finance and consequently might help to slow the current pace of regulatory change in alternative finance which is impeding growth,” he said.
“It would be good to also see more specialist financial advisers who are similarly able to help investors safely navigate the complexities of alternative finance.”
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Leech said that in the longer-term alternative finance stands to gain a greater share of retail assets under management, from the “behemoth asset managers”.
He said longer performance track records at alternative finance companies, alongside improved transparency and ongoing declines in the cost of due diligence and processing information places alternative finance on a stronger footing for the future.
“Alternative finance clearly has the potential, subject to cooperation from regulators, to be a major contributor to the UK economy and to also enable people to build their nest egg savings, despite what looks like the bleakest outlook for real returns from equities, property and bonds since perhaps the 1930s,” he added.
Meanwhile, he said infrastructure service providers have the potential to help UK platforms to passport into other regulatory jurisdictions, making it easier to source capital from international pools, rather than being primarily reliant on “the Brexit-challenged UK economy”.
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Commenting on the future of AxiaFunder, Leech said in the short term the firm was focused on building more relationships with brokers and law firms who can deliver homogeneous pools of small cases that are relatively easy to process. “This should enable £1m of funding per month by the end of 2023, which would provide significant free cashflow to reinvest into developing the platform,” he said.
“Longer term, we are excited about AI innovation, like ChatGPT, to potentially enable AxiaFunder to due diligence litigation investments more efficiently. It’s notable how much excitement among senior tech leaders there is this month about recent advances in this field.”
