Peer-to-peer loan fund considers change of manager

The UK’s first peer-to-peer loan fund is to review its investment manager as a swath of funds struggle to generate returns from the emerging asset class.

The listed fund, P2P Global Investments, buys loans from websites matching interest-paying borrowers with lenders in the UK, US, Europe and Australia, as well as holding stakes in the platforms.

It is currently managed by MW Eaglewood Europe, an asset manager majority-owned by UK hedge fund Marshall Wace. In a short announcement to the stock market on Tuesday, the board said it would review the arrangement following discussions with Eaglewood and “significant shareholders” and would update the market in due course.

The company declined to comment further.

Ewan Lovett-Turner, investment trust analyst at broker Numis, noted that little had been said about “the scope, nature or timescale” of the review — however, he said poor performance was likely to have prompted the board to take action.

The fund has delivered a total return on net asset value of 3.6 per cent over one year, compared to 15 per cent for the specialist debt sector more broadly, according to figures from the Association of Investment Companies.

Mr Lovett-Turner said it was “not surprising to see the manager under pressure, given that the fund’s performance has been disappointing since launch”.

Despite this, P2PGI has drummed up huge interest among fund managers. With yields on bonds at low levels, peer-to-peer loans have offered investors relatively attractive returns — currently they offer a one-year return of 5.2 per cent, according to an index by Altfi Data and investment bank Liberum.

While P2PGI’s major shareholders include asset managers Invesco Perpetual and Woodford Investment Management, Psigma Investment Management, BlackRock and Legal & General Investment Management all have small shareholdings in the trust.

P2PGI also garnered interest when it raised extra funds of £400m in 2015, bringing its total market capitalisation to nearly £900m a year after it listed on the London Stock Exchange.

The alternative asset class is not popular with everyone, however. Canaccord Genuity, the broker, warned that investing in peer-to-peer loans did not offer any “guarantee of uncorrelated absolute returns”.

“While P2PGI enjoyed a spectacular period of growth in its first year, storm clouds have quickly gathered,” said Alan Brierly, analyst at Canaccord.

“In a relatively benign environment, P2P has disappointed. One of our key reservations is what happens in more challenging economic conditions,” he added.

P2PGI is only one of a handful of listed funds buying peer-to-peer loans. US private equity house Victory Park Capital and Funding Circle, the UK’s biggest peer-to-peer loan provider, both listed peer-to-peer funds on the London Stock Exchange in 2015.

As a sector, peer-to-peer lending endured its fair share of controversy in 2016. Lending Club, a major US lender, was engulfed in scandal in spring last year following the resignation of its chief executive, Renaud Laplanche, following an internal probe over allegedly mis-sold loans.

In February, Lord Adair Turner, the former chairman of the UK’s financial regulator, warned that peer-to-peer lenders could be the source of losses that would “make the worst bankers look like absolute lending geniuses”.

He later appeared to have had a surprising change of heart, saying the fast-growing digital sector might come to form a “stable and secure” part of the financial ecosystem, and could even make a future credit crunch less likely.

The UK watchdog signalled plans to impose tougher rules on the sector in December.