The alternative finance market is becoming bigger – and more diverse.
Last year, the lending sector was getting a feel for fundification, while the equity side was seeing shifts into specialised areas like biotech. This year, those changes are bedding in, and companies are coming up with increasing numbers of new models that offer more to the investor.
Here are five investor-orientated products launched this year that are worth knowing about.
1. SyndicateRoom’s fund
More companies on the lending side of alternative finance are creating funds that invest across their platforms. Funding Circle closed its £150m SME Income Fund last year, and in the States, fund-creation has been an industry standard for several years now.
SyndicateRoom is the first equity crowdfunding platform to launch a fund. Fund Twenty8 is open until December 2016, with investors required to make a minimum investment of £10,000. The maximum fund size is £25m. “We’re catering to the passive investors who prefer a portfolio approach to investing but don’t want to pay the hefty management fees that usually come with it. This new product offers a diversified portfolio for our investor community, while providing an even stronger route for companies to seek growth capital,” says James Sore, SyndicateRoom’s chief investment officer.
2. AltFi Data’s analytics tool
UK-based industry analytics and news firm AltFi has launched a new market data product which enables users to look under the bonnet of platforms’ loan books. With customisable tools, the subscription-only service will give access to over half a billion data points and half a million loans made across the industry.
Because the industry is now thinking about alternative lending not just as a new asset class but as multiple asset classes – an invoice factoring firm differs massively from a consumer lending platform, for instance – tools like this will help the retail investor do the same. “By taking cash flow data and analysing loan books, AltFi Data is helping to establish independent, third party standardisation within the sector. It’s important that each platform is seen in its correct context, and the differences between them are clearly illustrated for investors and borrowers,” says Anil Stocker, chief executive and co-founder of MarketInvoice.
3. LendingWell’s one stop shop
New platform LendingWell, which is set to launch in September, provides retail investors and independent financial advisers access to, analysis of and the ability to invest across the P2P lending market through a single account. Using AltFi data, and co-founded with Liberum Alternative Finance, in addition to a self-directed option and three pre-selected portfolios, LendingWell will also issue bonds against a portfolio of loans, offering investors a fixed return.
“We are providing research and data on 85 per cent of the P2P landscape, in terms of volume, so investors can make an informed investment decision and place their investment across multiple platforms, creating a well considered, diversified portfolio,” says Tim Slesinger, chief executive of LendingWell.
Read more: P2P's seduction of the financial adviser
4. Zopa’s branch out into car loans
Zopa Car ReFi is the name of Zopa’s new car refinancing service, which aims to give drivers a better deal. The idea is that the P2P platform will help consumers save money by swapping them out of existing agreements and offering a lower-cost secured loan.
Many in the sector expect to see more moves like this: platforms offering specific products. Zopa chief executive Jaidev Janardana explains: “car loans are the most popular reason for taking a loan from Zopa and by introducing Zopa Car ReFi we can help thousands of people with existing car finance agreements drive down the cost of car ownership and save money.”
5. Crowdcube’s secondary market
Cracking a secondary market in equity crowdfunding was always going to be a tricky task: early-stage companies don’t have much of a track record and are often reticent around sharing – particularly financial – information. Moreover, the fact that the Enterprise Investment Scheme (which 66 per cent of crowdfunding opportunities are eligible for) means investors must hold their shares for three years in order to receive the tax relief has kept money flows around primary issuances.
But Crowdcube, which has already seen two flagship exits, is confident it can help investors find liquidity and increase the level of re-investment post-exit. Having raised £6.2m last month, it plans to create a secondary online market, appealing to its 300,000 existing investors. Co-founder Luke Lang comments: “it is important that liquidity events become more customary. Pioneering secondary liquidity is a key milestone for the crowdfunding industry as we aim to deliver a track record of returns for investors, which is vital for the long-term future of any investment class, including equity crowdfunding.”