The Importance of Permanent Capital

The Importance of Permanent Capital
Simon Champ, CEO of Eaglewood Europe

Mr. Champ describes the evolution of borrowing and lending to date, explaining the implications for lenders, platforms and borrowers at each stage of the industry’s development:

  • Stage 1: Individuals lending to each other -- an arrangement in which scale, certainty and diversification were lacking for lenders, while fair rates and speedy fulfillment were lacking for borrowers;
  • Stage 2: The emergence of money lenders, who introduced liquidity to the lending market, as well as diversification and scale;
  • Stage 3: The rise of banks, who held the vast majority of market share in the lending industry for ~500 years;
  • Stage 4: The establishment of direct P2P platforms, which benefitted borrowers by promoting fairer rates;
  • Stage 5: The beginning of pooled investments in the form of open-ended funds, which improved diversification and scale for lenders and provided a more personalized and seamless experience for borrowers;
  • Stage 6: The rise of permanent capital in the form of closed-end funds, which drove wide-ranging improvements for lenders, platforms and borrowers alike.

When markets become big enough, the need for permanent capital dissipates, Mr. Champ notes. For the time being, however, it is a “vital building block” to the growth of the online lending industry. Mr. Champ also remarks upon the role of P2P Global Investments, the online lending investment trust managed by Eaglewood Europe, in accelerating the “inevitable disintermediation of some areas of banking.”