P2P could replace bonds in investors’ portfolios
Peer-to-peer investments could replace bonds for investors seeking fixed yield, Robo.cash research has suggested.
Analysts from the European P2P lending platform studied a number of portfolio combinations using the Sharpe ratio, which compares the return of an investment with its risk.
It identified four options with the best results: P2P and stocks, P2P and bonds, P2P and deposits, and P2P and crypto.
“One can see from the figures that P2P could replace bonds in terms of its fixed yield,” said the specialists. “But like any investment, P2P lending has certain risks, although it is proving to be effective. To cover the inflation rate, an investor still needs to take risks. As we can see from the results, the combination of P2P with riskier assets looks like a ‘golden mean’ between bonds and deposits in the risk/return ratio.”
Read more: Robo.cash debuts new portfolio option
When comparing two assets with nearly the same expected return, investing in the asset with the higher Sharpe ratio will be less risky, Robo.cash said.
“P2P lending is a fixed-income instrument, therefore, by the nature of its use it can be compared to deposits or bonds,” it said. “In the case of assets with non-fixed returns, an aggressive portfolio of P2P and cryptocurrencies, for example, will be more profitable than one of P2P and stocks.”
Read more: Robocash Group revenues rose 16.2pc last year
However, Robo.cash said it would still take time for conservative investors to switch from bonds or deposits to P2P lending.
Robo.cash is owned by Robocash Group, which operates in Europe and Asia. The alternative finance group highlighted growth in the second quarter of the year compared to the first quarter, with 67 per cent and 20.5 per cent increases in profit and revenues respectively.
Read more: Robo.cash sees €600m of loans funded in first quarter