P2P investors plan to keep on lending despite economy woes
The majority of peer-to-peer lenders plan to continue investing in the sector, despite their diminishing confidence in macroeconomic conditions, exclusive research has found.
According to a new reader survey by Peer2Peer Finance News, 45.2 per cent of P2P investors feel less confident about the state of the economy than they did six months ago. Just 12.9 per cent said that they feel more positive about the economy this year, while 41.9 per cent said their outlook is unchanged.
Yet despite pessimism around the macroeconomic environment, only one third (32.3 per cent) of P2P lenders said that they did not plan to continue investing in the sector going forward, highlighting the resilience and opportunity in UK P2P.
More than half (55.2 per cent) said they planned to continue investing in P2P loans, while the remainder – 12.5 per cent – said they were not sure.
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Peer2Peer Finance News polled thousands of individual investors subscribing to its e-newsletters last month and found that the vast majority fall into the high-net-worth (HNW) and sophisticated investor categories.
51.6 per cent defined themselves as sophisticated, while 45.2 per cent identified as HNW. Just 3.2 per cent categorised themselves as “restricted retail”. Notably, none of the respondents defined themselves as being advised, which could be a reflection of financial advisers’ reticence to engage with the sector, leaving investors to manage their own P2P portfolio.
Reflecting this demographic split, just 12.9 per cent of the investors surveyed said that they held less than £10,000 in P2P loans.
Almost a quarter (22.6 per cent) of the investors surveyed said that they had between £10,000 and £50,000 invested in P2P. 38.7 per cent valued their P2P portfolio at between £50,000 and £100,000.
12.9 per cent had between £100,000 and £300,000 invested, and the remaining 12.9 per cent had between £300,000 and £500,000 invested in P2P.
The survey results found that investors are well diversified in their P2P portfolios, with a fifth (19.4 per cent) of lenders invested in at least six platforms simultaneously.
Just under half (48.4 per cent) were invested in between two and six platforms, while 32.2 per cent were invested in one to two.
Property was by far the most popular segment for investors, with 87.1 per cent of those surveyed saying that they had investments in P2P property lenders.
Mike Bristow, chief executive of CrowdProperty, said that these results were unsurprising, given the breadth and track record of the property segment.
“Property, and in particular residential property, has a relatively robust value to formally secure against when compared to business or consumer lending,” he said.
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“However it does require deep asset class expertise at the core of a well resourced lender that is fully focused on property in order to do attract, underwrite, secure, manage and redeem loans to best effect.
“Investors will naturally continue to invest in this asset class given these factors – but more and more so with the most experienced, best resourced and most proven lenders where a well diversified portfolio can easily be built.”
“Property has always been a secure investment, whatever the economic landscape,” agreed Paul Auger, chief operating officer at P2P property platform Kuflink.
“Property values fluctuate and may even decrease, but over the medium and long term they still offer good returns, and are considered a safe investment. It would be very rare for an investor to lose their entire capital as can happen with some other asset classes.”
35.5 per cent of the investors surveyed expressed a preference for small- and medium-sized enterprise loans, while 25.8 per cent said that they like to invest in consumer loans.
When asked to list the top three most important factors when choosing P2P loans, more than 80 per cent of investors said they look at the platform’s default rates, while 71 per cent said interest rates were one of the most important issues. The third most popular investment factor was tied between platform security and the quality of the platform’s management team.
Just 9.7 per cent of investors said that environmental, social and governance (ESG) factors were a top consideration, despite an industry-wide push to improve the ESG credentials of financial services firms.
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