DIY Investor Magazine
/
Jan 2017
32
The entire investment landscape has been affected by uncertainty – the Bank
of England (BoE) has introduced a new round of Quantative Easing, Brexit may
be soft or it may be hard, and equity markets are said to be fully valued writes
Peter Curtain of Allerton Communications.
THE QUEST FOR INCOME: MARKET PLACE LENDING
COMES OF AGE
BoE measures to protect the economy long ago ended
the days of adding 3% by moving cash from your
current to a savings account, the hunt is now on for
income, so what alternatives are available to investors?
One area worth exploring is the burgeoning marketplace
lending sector, where technology entrepreneurs and
financial stalwarts alike are producing new ways of
linking financial demand to supply.
Crowdfunding, in its narrower definition, involves equity
investment in smaller, private start-ups or early-stage
companies, facilitated by an online platform. Peer-
to-peer lending (P2P) involves a similar method of
distribution, but instead entails lending to individuals
and businesses over a short- to medium-term in return
for regular interest payments and has attracted a large
following among income-focused investors.
‘The peer-to-peer finance industry has grown
exponentially over the past decade, becoming a
disruptive force in the consumer and business lending
markets,’ said Suzie Neuwirth, founder and editor-
in-chief of Peer-to-Peer Finance News, a magazine
focused on the UK P2P industry.
‘By offering an alternative to high street banks, the
industry has secured financing for thousands of
eligible borrowers, offering more specialised credit risk
assessment and quicker service.
Amid low interest rates and a volatile stock market,
investors have benefited from highly competitive, steady
returns. £6.5bn has now been lent through the UK’s
largest platforms, according to the latest figures from
the Peer-to-Peer Finance Association, but there is still
plenty of scope for growth.’
‘£6.5bn has now been lent through the UK’s largest
platforms’
In a further boon for the industry, the Government has
recently launched a new type of ISA especially for
sheltering peer-to-peer returns from taxation.
The Innovative Finance ISA (IFISA) enables investors to
allocate up to £15,240 to P2P investments in the same
way they might invest in cash or shares. However, P2P
platforms require direct authorisation from the FCA
to offer this product and while many platforms have
applied, only a handful have been approved thus far.
Suzie Neuwirth believes take-up will be big: ‘The
Innovative Finance ISA is set to propel the industry into
the mainstream.
The recognition from the Government alone will go
a long way towards attracting new investors to the
sector, and the proposition itself provides a tax-free and
potentially lucrative opportunity for retail investors.’
Let’s look at a few of the many platforms operating
in this space, their core offerings and some key
considerations for you as an investor.
UK Bond Network (UKBN) combines traditional
corporate bond structuring techniques and peer-to-peer
platform technology to provide investors with direct
access to secured, high-yielding bonds.
Bonds are issued by both private and listed companies
– to date these have included both AIM and main-
