Blend Network Chief Strategy Officer Roxana Mohammadian-Molina wrote a column in last week’s Bridging & Commercial titled ‘Wealthy investors want to lend and are using peer-to-peer lending platforms to do so’. In case you missed it, you can read it below:
Read it online here: https://bit.ly/2Zx7kJE
Wealthy investors with cash on hand are keen to lend because they have nowhere else to put their money. Roxana Mohammadian-Molina, Chief Strategy Officer at development finance and bridging lender Blend Network that is backed by a number of those investors, argues that peer-to-peer property lending platforms are in an ideal position to serve as an origination vehicle for those wealthy investors.
A recent article[1] described how ultra-rich families with cash on hand had started to pile into private debt to avoid stock market volatility. As a company that is backed by a number of high-profile investors, we at Blend Network have witnessed a similar trend with an increased lending appetite from our family office and high net worth investors. Blend Network is backed by investors including Cyrus Ardalan, former Vice Chairman of Barclays and current Chairman of OakNorth Bank and Citigroup Global Markets, the Family Office of former Publicis Group CEO Maurice Levy and Jean-Phillipe Blochet, co-founder of Brevan Howard, one of the world’s largest hedge funds which at its peak had $40bn in assets under management.
Of course, family offices and high net worth investors are looking to private debt because they have nowhere else to put their cash. Let’s start with government bonds: yields are barely positive in the US, while they are negative in Japan and much of Europe. Effectively, investors are guaranteed to lose money by holding those bonds till maturity. If inflation rises, as many expect to, the losses would be even larger.
How about equity markets? Investors we speak too are nervous that equity markets may see a correction following their recent rise. Between 19 February and 23 March, the S&P 500 index lost a third of its value. With barely a pause, it has since rocketed, recovering more than half its loss. While the catalyst was news that the Federal Reserve (Fed) would buy corporate bonds helping firms finance their debt, investors are undoubtedly worried that financial markets have got out of whack with the real economy and that something has to give[2]. Furthermore, even the recent rise in equity markets has been uneven and seen a geographical dislocation. UK and continental Europe stock markets, more reliant on industries like car making, banking and energy, have lagged behind while US markets have rallied mainly due to the outperformance of the tech sector, which now make up a fifth of the S&P 500 index.
It is no surprise then that family offices and high net worth investors are looking to the private debt market, often focusing on real estate. According to research firm Preqin, the number of family offices active in private debt has more than doubled since 2015 . But while some family offices have highly sophisticated investing operations and are able to originate property deals in-house, most rely on external origination and in-depth due diligence by professional teams.
It is against this backdrop, that peer-to-peer property lending platforms such as us at Blend Network are seeing increased appetite from our investors to source good deals. In other words, peer-to-peer property lending platforms are in an ideal position to serve as an origination vehicle for those wealthy investors. Of course, that is also advantageous for all those retail investors using peer-to-peer lending to deploy cash since they are effectively able to co-invest with highly sophisticated investors on the same deal and under the same conditions.
[1] Bloomberg: Ultra-Rich Families With Cash on Hand Pile Into Private Debt
[2] The Economist: The market v the real economy
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