Lend Academy Network Forum

General Category => Investing - General (not P2P) => Topic started by: Emmanuel on October 30, 2014, 03:00:46 PM

Title: Gathering experts' opinion about the future of peer lending
Post by: Emmanuel on October 30, 2014, 03:00:46 PM
We plan to orchestrate a survey amongst a few experts and major players in the peer lending space on the theme 'where will peer lending be 10 years from now'

Some topics will be 'retail vs institutional', major changes to come, impact of a stock market crash.

Does anyone has some question in mind they'd like to submit?
Title: Re: Gathering experts' opinion about the future of peer lending
Post by: rawraw on October 30, 2014, 07:02:06 PM
Will LC continue to release loans at only 4 times a day?
Title: Re: Gathering experts' opinion about the future of peer lending
Post by: thezfunk on October 31, 2014, 01:03:38 PM
How about some sort of universal market place for secondary trading of notes from different platforms?
Title: Re: Gathering experts' opinion about the future of peer lending
Post by: Emmanuel on October 31, 2014, 06:46:53 PM
How about some sort of universal market place for secondary trading of notes from different platforms?

Now you're preaching to the choir! We're probably too biased to ask that question (hint: http://www.lendingrobotexchange.com/)
Title: Re: Gathering experts' opinion about the future of peer lending
Post by: PeerSocialLending on November 02, 2014, 11:45:43 AM
I'd like to hear some thoughts on how they expect retail investors to get access to this asset class in the future.  Will folks like those on this forum simply be in the minority of trying to squeeze out better returns than funds full of notes?  Somewhat similar to buying your own real estate vs buying a REIT fund.

Looking forward to hearing more Emmanuel :)
Title: Re: Gathering experts' opinion about the future of peer lending
Post by: rawraw on November 02, 2014, 04:37:28 PM
I'd like to hear some thoughts on how they expect retail investors to get access to this asset class in the future.  Will folks like those on this forum simply be in the minority of trying to squeeze out better returns than funds full of notes?  Somewhat similar to buying your own real estate vs buying a REIT fund.

Looking forward to hearing more Emmanuel :)
How do retail people buy stocks and bonds with the massive amounts of institutional money in the space?
Title: Re: Gathering experts' opinion about the future of peer lending
Post by: PeerSocialLending on November 02, 2014, 04:46:36 PM
I'd like to hear some thoughts on how they expect retail investors to get access to this asset class in the future.  Will folks like those on this forum simply be in the minority of trying to squeeze out better returns than funds full of notes?  Somewhat similar to buying your own real estate vs buying a REIT fund.

Looking forward to hearing more Emmanuel :)
How do retail people buy stocks and bonds with the massive amounts of institutional money in the space?

Sorry I wasn't more clear. I'm interested in a discussion of how many people they expect to access this asset class in a fund vs through the platforms directly. It seems like accessing 'p2p' via funds could make up a majority at least as far as retail investors are concerned. I'm aware of the literal 'how' of buying a fund.
Title: Re: Gathering experts' opinion about the future of peer lending
Post by: Fred93 on November 02, 2014, 05:14:07 PM
Sorry I wasn't more clear. I'm interested in a discussion of how many people they expect to access this asset class in a fund vs through the platforms directly. It seems like accessing 'p2p' via funds could make up a majority at least as far as retail investors are concerned. I'm aware of the literal 'how' of buying a fund.

I think what rawraw was trying to say is that even tho most of the trading on wall street is institutional (ie comes thru middlemen, mutual funds, hedge funds, advisors, etc) the common man still has ample opportunity to buy and sell individual stocks & bonds directly.  Therefore, just because a lot of money is coming thru intermediaries doesn't mean individuals will necessarily be crowded out.

I think the presence of the intermediaries is hilarious.  This industry is based on the notion of disintermediation of banks.  So what happens?  A bunch of intermediaries of different kinds pop up and try to shave their piece off of the returns!  There are various "funds" investing in P2P loans taking their 1% or whatever (extremely high if you ask me), and there are even middlemen who help institutional investors who don't have enough knowledge to do it themselves.  These are middlemen for the middlemen!  Orchard Platform has this business model.  If you want to start a hedge fund to invest in P2P, but you don't know beans about P2P, you just let Orchard tell you what to do and automate it as well.  That is both outrageous and hilarious.  The enablement of a bunch of guys in New York who know nothing is just classic.
Title: Re: Gathering experts' opinion about the future of peer lending
Post by: rawraw on November 02, 2014, 07:09:14 PM
I'd like to hear some thoughts on how they expect retail investors to get access to this asset class in the future.  Will folks like those on this forum simply be in the minority of trying to squeeze out better returns than funds full of notes?  Somewhat similar to buying your own real estate vs buying a REIT fund.

Looking forward to hearing more Emmanuel :)
How do retail people buy stocks and bonds with the massive amounts of institutional money in the space?

Sorry I wasn't more clear. I'm interested in a discussion of how many people they expect to access this asset class in a fund vs through the platforms directly. It seems like accessing 'p2p' via funds could make up a majority at least as far as retail investors are concerned. I'm aware of the literal 'how' of buying a fund.
+1
Title: Re: Gathering experts' opinion about the future of peer lending
Post by: Emmanuel on November 03, 2014, 02:38:48 PM
Thanks for the feedback.
The whole 'retail vs institutional' topic is indeed a pretty important one!
Title: Re: Gathering experts' opinion about the future of peer lending
Post by: rawraw on November 03, 2014, 03:33:55 PM
I meant to +1 Fred93's reply.  But I must've clicked the wrong box on my phone.  The retail vs big guy stuff gets old after a while IMO.
Title: Re: Gathering experts' opinion about the future of peer lending
Post by: Fred on November 03, 2014, 10:37:04 PM
These are middlemen for the middlemen!  Orchard Platform has this business model.

Out of curiosity, does anyone know if these middlemen are profitable (i.e., revenues > costs)?

If we are talking about 2%-20% style of hedge fund fees, it would require $10M AUM @ 12% ROI to generate enough money to support a 2-person team.
Title: Re: Gathering experts' opinion about the future of peer lending
Post by: brycemason on November 05, 2014, 09:25:24 AM
I'm profitable :). Three paying clients, and I keep my expenses super low.

I'd like to see a question about the desirability or importance of third party ratings on credit quality. A uniform approach, from Moody's or S&P or that ilk.
Title: Re: Gathering experts' opinion about the future of peer lending
Post by: rawraw on November 05, 2014, 10:06:29 AM
I'm profitable :). Three paying clients, and I keep my expenses super low.

I'd like to see a question about the desirability or importance of third party ratings on credit quality. A uniform approach, from Moody's or S&P or that ilk.
But are you running the fund?  Independent credit quality is really important IMO
Title: Re: Gathering experts' opinion about the future of peer lending
Post by: AnilG on November 11, 2014, 03:34:22 AM
The P2P institutional fixed income funds, I work with, have AUM much higher. Also, they are not targeting double-digit returns, mostly mid to high-singles.

Orchard is very active with order management for institutional funds. But Orchard's end game is to create a secondary marketplace like FOLIOfn for institutional investors. They recently raised $12M of VC money. So, I don't expect them to be cash flow positive. There seems to be lot of activity in creating secondary marketplace for institutions as there is none right now. I am aware of at least 3 startups trying to target this segment.


Out of curiosity, does anyone know if these middlemen are profitable (i.e., revenues > costs)?

If we are talking about 2%-20% style of hedge fund fees, it would require $10M AUM @ 12% ROI to generate enough money to support a 2-person team.
Title: Re: Gathering experts' opinion about the future of peer lending
Post by: Fred93 on November 11, 2014, 02:16:53 PM
third party ratings on credit quality. A uniform approach, from Moody's or S&P or that ilk.

They did so well on securitized mortgages.
Title: Re: Gathering experts' opinion about the future of peer lending
Post by: thezfunk on November 11, 2014, 02:39:15 PM
third party ratings on credit quality. A uniform approach, from Moody's or S&P or that ilk.

They did so well on securitized mortgages.

I know! Think how well they would do with securitized P2P loans!  With their magic they could take a basket of D-HR loans and turn them into A loans!  I can't wait to sink my entire retirement fund into their securitized products which, with an A rating, will ensure low defaults and high returns! 

I trust their ratings completely because it's not like they defrauded investors in the past with similar products.  Even if they did it was just their 'opinion' and if you chose to believe them then you're the sucker and they did nothing wrong!
Title: Re: Gathering experts' opinion about the future of peer lending
Post by: rawraw on November 11, 2014, 03:42:21 PM
third party ratings on credit quality. A uniform approach, from Moody's or S&P or that ilk.

They did so well on securitized mortgages.
Only some mortgages, most with very complex structures.  Their ratings continue to work elsewhere
Title: Re: Gathering experts' opinion about the future of peer lending
Post by: AnilG on November 11, 2014, 09:00:00 PM
The problem with independent ratings is the conflict of interest they create. How are these independent raters will be compensated? As soon as the payment is being received from loan originators or buy/sell side orgs, it creates the conflict of interest. It is the same issue with stock analysts and investment banking. The intentions are noble but execution is fraught with conflicts and issues.

"There are no unbiased ratings."

third party ratings on credit quality. A uniform approach, from Moody's or S&P or that ilk.

They did so well on securitized mortgages.
Only some mortgages, most with very complex structures.  Their ratings continue to work elsewhere
Title: Re: Gathering experts' opinion about the future of peer lending
Post by: brycemason on November 11, 2014, 09:25:46 PM
Fine. Triangulate the truth with multiple independent viewpoints. I think my point stands that reputational risk of platforms isn't enough.
Title: Re: Gathering experts' opinion about the future of peer lending
Post by: Fred on November 12, 2014, 01:17:23 AM
The problem with independent ratings is the conflict of interest they create. How are these independent raters will be compensated?

+1

Moody's and S&P charge about 5 bp to issue ratings.  LC would need to fork $2.5M to have its $5B notes rated by an agency.  Most bond investors require ratings from 2+ agencies, so this would cost LC $5+ M.
Title: Re: Gathering experts' opinion about the future of peer lending
Post by: rawraw on November 12, 2014, 06:13:42 AM
Fine. Triangulate the truth with multiple independent viewpoints. I think my point stands that reputational risk of platforms isn't enough.
One potential problem that I could see with this is the background of the independent view points.  There are a lot of people involved in this space who haven't actually had any interaction with traditional lenders (both inside and outside of LC).  Sometimes the presence of data can fool us into thinking we know something much better than we actually do.  This is why I expect the business loans and potentially subprime loans to be a train wreck for LC -- of all credit, prime consumer credit is a easy to actually know from the data.  But maybe LC has staffed up with people experienced in those matters -- I'm doubt the average investor (even institutional) will get it right if LC puts garbage up for investment.

This was one of the problems with the toxic mortgages mentioned earlier.  Because the historical dataset said everything would be fine and people involved didn't realize it was a reflexive relationship between the inputs and outputs.  But I'm sure if some of those people had actually visited the people making the loans, they would have realized no matter what the data said something was awry.

One thing people are ignoring is that for consumer credit, FICO would be something similar to a third party review although incomplete.