4th Way launches the first P2P index
Peer-to-peer lending research firm 4th Way has launched the first index dedicated to tracking the performance of P2P loans.
The P2P And Direct Lending (PADL) Index will offer investors a direct comparison of property-secured lender performance. Its constituents encompass more than half of the UK’s P2P and direct lending market by current volume, representing more than £745m.
These primary constituents include: CapitalRise, CrowdProperty, Invest & Fund, Kuflink,
Loanpad, and Proplend.
The PADL Index has already amassed a decade’s worth of data, and this data will be continuously updated in order to provide investors with the latest lender statistics as well as historical performance data.
Read more: P2P has outperformed shares by 2pc over the past decade
“It is always sensible for investors, journalists, financial advisors and the regulator to be cautious whenever there is a new type of investment or when an asset class becomes available to a different set of people,” said Neil Faulkner, co-founder and managing director of 4thWay.
“That’s because most innovative investment products come with too high costs, which destroys the risk-reward balance.
“Yet we are finally able to show that P2P and other online direct lending is no longer new and the reason why it has survived now for nearly two decades with a very loyal investor base is because it has outperformed so many people’s expectations by a long margin. Not just in overall gains, but in its reliability and stability too.
Read more: Invest & Fund heralds P2P’s fixed income-like returns amid market volatility
“At the same time, it’s ethical investing. Money lending directly with borrowers who are putting the loans to good use brings many benefits to the nation as a whole, since banks struggle to handle many types of property-secured loans, which slows economic growth and stifles property supply.
“Borrowers get the nice plus of working with businesses – and individual lenders – who actually care about them, too.”
The PADL Index found that over the past 10 years, P2P lending results have been “highly favourable” compared to the stock market.
The annualised returns in P2P and online direct lending after costs have been 7.36 per cent per annum over the past decade. During the same period, share investors in FTSE 100 companies have made 4.90 per cent per annum after reinvesting dividends and after costs.
Furthermore, there have been no down years for P2P lending investors versus three for share investors.
“As my team drills down into our detailed and growing datasets, we see even more clearly how stable and profitable online lending is compared to all the major asset classes, including savings, shares or even investing in bond funds, as well as versus inflation, stretching right back to the beginnings of online lending in 2005,” added Faulkner.
“It’s time to completely cast off the stigma that some have attached to P2P lending, merely because it’s new. The case for this investment moving into the mainstream is resoundingly clear.”
Read more: Folk2Folk passes £700m lending milestone
