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Deals & Dealmakers

More institutional investors pumping money into crowd

Institutional investors are turning their favorable attitudes about the marketplace lending industry into action, increasing their investment in the sector over the past year, according to a new report by Richards Kibbe & Orbe LLP and Wharton FinTech.

Their 2016 Survey of U.S. Marketplace Lending finds that half of all institutional investors surveyed have made some form of investment in marketplace lending, up from less than 30% just one year ago. The second annual survey illustrates solidifying confidence among investment funds in the disruptive industry of marketplace lending , which connects borrowers and lenders directly over Internet-based platforms.

The survey of more than 300 institutional investors also reveals that optimism about marketplace lending continues to grow among institutional investors, running counter to the widespread predictions by other observers of an industry contraction.

More than 80 percent of respondents expressed high or moderate levels of optimism for marketplace lending’s future, up from 71 percent last year.

Other key findings include:
• A substantial majority of respondents — 72 percent — believe that consolidation of the marketplace lending industry is somewhat or very likely.
• Among respondents who invest in whole loans or borrower payment dependent notes through marketplace lending platforms, consumer (unsecured), small business and real estate loans are the most popular investments.
• While respondents identified borrower quality as the greatest risk to marketplace lending in 2015, that risk factor fell to third this year, market-wide credit risks and regulatory risk.
• More than 40 percent of compliance professionals said they were not familiar with regulatory framework.

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