The Impact of Institutional Investors - What Does the Data Tell Us?

The Impact of Institutional Investors – What Does the Data Tell Us?
Rupert Taylor, CEO, AltFi Data

Mr. Taylor’s presentation focused on institutional investor activity on marketplace lending platforms and identified several trends. In the UK, there is institutional activity on Zopa and Funding Circle’s platforms, while RateSetter mainly remains a platform for retail investors. Institutional investors enjoy a higher average rate of return across platforms, but they experience bigger losses than individual investors, he added.

Average loan size has fallen for institutional investors, while loan terms continue to be the same for both institutional and retail investors. In terms of sector diversification, institutional investors are avoiding property loans, underweighting leisure and hospitality, and overweighting healthcare, he said.

The AltFi Returns Index, which shows cumulative returns across the main UK platforms, shows investors in the asset class are indeed getting a significant risk premium, Mr. Taylor said. In addition, they are paying lower fees and seeing fewer defaults. Going forward, building trust will be instrumental for the industry to prosper, and proper disclosure and benchmarking are fundamental to building trust, he said.

In summary, institutional investors have become more active, and that has brought innovation into the sector. For example, institutional investors have brought new sources of loan origination to the table. However, the experience they have had so far is quite different from that of individual investors in terms of both risk and return.