According to a recent article in the FT Advisor, alternative assets can be a source of income (see link). The article argues that following a period of lower yields in traditional assets over the past decade or so, investors have started to flirt with alternative assets. So, here we ask why? Why has the practice of investing in alternative assets, in particular lending money to property developers in loans that are secured against legal charges on the property become so popular? What can it bring to a balanced pension portfolio? And why are platforms such as Blend Network thriving?
First, for years property was the asset that dominated most investors’ alternative allocation. So, it is only natural that P2P property lending has been the next step for investors looking for yield and fixed returns. In other words, investors ‘understand’ property and their familiarity with the asset class has contributed to the increasing popularity of P2P property lending. Many investors with Blend Network also invest in physical property and use P2P property lending to diversify their property portfolio.
Second, P2P property lending allows investors to do well by doing good. The BBC’s Housing Briefing estimates that we have built 1.2 million fewer homes today than we should have, and the need for more homes is increasing. P2P property lending allows investors to participate in the national housebuilding effort by investing in pre-vetted and pre-screened loans and lending directly to property developers who, in the case of Blend Network, are building more affordable homes. The borrowers are typically experienced SME property developers and small construction companies looking to fund their projects and cut off from traditional finance because banks don’t have a huge appetite to provide development finance nowadays.
Third, the interest earned by P2P property lending is usually higher than the interest on cash deposits (though P2P lending carries risk to your capital and is not covered by the FSCS, whereas cash in a bank is covered by the FSCS) and, while there is a risk that a borrower may default, P2P property loans usually offer fixed returns, thus shielding investors from the volatility of stock markets. This makes P2P lending an attractive option to investors willing to take some risk and who are looking to achieve higher returns, particularly retirees looking for the security of an annuity. Do you own a SIPP or SSAS? Are you interested in finding out how you can invest your SIPP and SSAS money in Blend Network’s property-secured loans? Get in touch with our team now.
Your capital is at risk if you lend to businesses. P2P lending is not covered by the Financial Services Compensation Scheme. Investments are illiquid (the inability to sell assets quickly or without substantial loss in value). Past performance is not a reliable indicator of future results.
Blend Loan Network Limited is an Appointed Representative of Resolution Compliance Limited which is authorised and regulated by the Financial Conduct Authority (FRN. 574048)