Aggregation in P2P Lending Tim Slesinger LendingWell - CEO - - PowerPoint PPT Presentation

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Aggregation in P2P Lending

November 2016

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2010

£53m UK P2P LENDING MARKET

2020

£20BN

Expected CAGR

48%

2015-2020

£2.9BN

2015

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95.5% 4.4% 0.1%

Consumer lending Business lending Property lending Invoice financing

2010 <10 P2P Platforms

AN EVER MORE CHALLENGING LANDSCAPE FOR INVESTORS TO NAVIGATE

2016 >100 P2P Platforms

33.1% 23.7% 30.8% 12.4%

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2015

NUMBER ACCOUNTS GROWTH

11%

TOTAL AuM GROWTH

78%

STILL AN EARLY ADOPTER MARKET…

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Direct via platforms 1

Investors (Institutional and Retail) invest in loans direct through a lending platform Zopa; Funding Circle; Lending Club

Listed Investment trusts 2

Investors buy shares in an investment trust listed on a stock exchange P2PGI, Ranger Direct Lending, Honeycomb, Funding Circle Trust, Victory Park Speciality Lending

Unlisted GP/ LP funds & Managed accounts 3

Investors invest in an unlisted fund as a limited partner with fund being managed by a general partner Colchis, Ranger Direct Lending, Prospect Capital Mgmt.

P2P aggregators (plumbing solution) 4

Investors put money into a segregated client account with a custodian. The P2P aggregator enables the investors to directly invest in fractional loan parts NSR Invest, Goji, Bondmason, LendingWell

WAYS TO INVEST IN P2P LOANS INCLUDE…

Description Examples

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CONFUSING!

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AN EVER MORE CHALLENGING LANDSCAPE FOR INVESTORS TO NAVIGATE

INVESTOR/ ADVISER

DIVERSIFICATION IS NOT STRAIGHT FORWARD

Inefficient Complex Time Consuming

Loan 3 Loan 4 Loan 5 Loan 6 Loan 1 Loan 2

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• Increasing number of UK P2P platforms – 100+
• Landscape is evolving fast, with now 5 UK platforms each lending c £50m per month
• Understanding the wide range of products offered on these platforms (secured, unsecured etc.) and

underlying loans (property, businesses, car fleets etc.) makes the selection difficult

Which P2P lending platform is right for you?

11.0% 9.0% 7.5% 7.2% 6.9% 5.6% 5.5% 4.8% 3.8% 200 400 600 800 1000 1200 0% 2% 4% 6% 8% 10% 12%

Funding Secure Market Invoice Assetz Lendinvest Funding Circle Lending Works Ratesetter Wellesley & Co Zopa

Net Return - LHS Volume (£m) - RHS

P2P LENDING: ASSET CLASS, RETURNS AND DEPLOYMENT CAPABILITIES

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• Average UK P2P returns to

investors net of all losses and fees is relatively stable in the 5-6% range.

UNLEVERED NET RETURNS IN UK CURRENTLY: 5.4%

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HEADING TEXT

IF ISA OPEN TO P2P LENDING

£44bn £79bn 2010 2015 2020e

Potential P2P Lending into IF ISA (£bn)

£116bn

TOTAL ISA MARKET

Stock Cash Stock Cash P2P lending

£8BN

• pportunity

p.a. by 2020

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FINANCIAL ADVISERS AND ISAS

£65BN

IN 2015 GROWING 8% YOY

Whole of Market

Independent Research & Reports Training Assets under influence

THE OPPORTUNITY: THE UNTAPPED FINANCIAL ADVISER MARKET

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Plumbing mechanics; use Burrows chart

• Straight through loan part ownership
• No Pooling
• Client money fully segregated

Aggregator “omnibus” account mgmt: EFFICIENT/FLEXIBLE

Revenue model- EFFICIENT / LOWCOST

Total Expense Ratio

0.40-0.85% Of AuM p.a.

Simple and transparent thin layer of fees charged to lenders only

Aggregators empowered by a ROBUST ECO-SYSTEM Multiple P2P Aggregators emerging in US & UK

NEW ACCESS CHANNEL: EFFICIENCY OF P2P AGGREGATOR

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OPERATIONAL RISK CREDIT RISK

• Internal controls
• Cash handling
• Business model
• Underwriting capabilities
• Probability of default
• Recoverability of losses

INVESTMENT RISK

• Loan concentration to any one borrower
• Loan diversification strategy for lenders

PLATFORM RISK

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DIVERSIFICATION IS KEY

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PLATFORM DATA SHEETS

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DATA-RICH ANALYSIS OF PORTFOLIO

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A THIRD PARTY VIEW ON AGGREGATORS

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Next key investment innovation Online Lending? ETN Open Ended Fund... would potentially unlock the Wealth Manager/ IFA market

• ETN – a DRAFT Work in Progress…
• Liquidity: as good / or better than a GP/LP

fund structure

• Listed with daily or bi-weekly valuation
• Always trades at / close to NAV (NAV gets

written down or up depending on market conditions)

• Scalable (initial size possibly only £20m)
• Low fees (0.5-0.7% pa total expense

ratio)

• Passive investment -tracks an

independent index e.g. LARI (AltFi data index)

• Worst case can recover 40% of cash

within 12 months and 100% within 3 years (ETN targets 10% cash equivalents at all times)

• Available initially only for sophisticated

investors and later for retail

• ISA-able / SIPP-able

P2P Aggregator ETN SPV ETN market maker 1 ETN Manager Independent Index provider e.g. AltFi Data

• LARI

ETN market maker 2 etc Individual Investor 1 Individual Investor 2 Individual Investor 3 Individual Investor 4

£1TN+

THE OPPORTUNITY: INSTITUTIONAL MARKET