Hedge Funds Will Call The Shots in P2P Lending, Survey Says

March 6, 2016 | By: Sean Murray

wall st P2P lending platforms will increasingly rely on larger hedge funds to fund their expansion, The New York Hedge Fund Roundtable believes.

The Roundtable is a non-profit organization committed to promoting education and best practices in the hedge fund industry. Timothy P. Selby, the organization’s president, said of a recent study they conducted, that institutional investors can’t afford to ignore Peer-to-Peer (P2P) lending. “Investing in peer to peer loans not only means the promise of high risk-adjusted returns, such private debt investments also provide less correlated risk relative to more traditional fixed income portfolios,” he said.

And as P2P platforms expand and need money, hedge funds feel it is they that will have the leverage in the negotiations.

In a survey of their members, 21% of respondents chose Lending Club as the business they believe best represents the future of banking 10 years from now. 11% picked Capital One. 6% chose Facebook.

Yet only 17% of respondents had actually actually invested in P2P lending so far. Part of the hesitation comes from the present state of interest rates. 20% of respondents believe that institutional capital will move away from P2P lending and back into traditional finance once interest rates start to really increase.

In the meantime, increasing interest in P2P lending by institutional investors will lead to riskier loans, they say, and it could lead to another credit crisis.

Credit crisis? What Credit crisis?

78% of respondents said history has proven that investors have incredibly short memories and that if securitizations backed by P2P loans offer attractive returns investors will likely dive in.

Of the survey respondents, 24% were fund managers; 9% were allocators; 9% were risk management or trading; 46% were service providers; and 12% were other industry participants.

Read the full survey results here.

Last modified: March 6, 2016