A Growing Crowd, Rate Rises, IPOs And Political Weather Forecasting
The following views are the personal opinions of Martin Baker, Money&Co’s head of communications and content. They do not necessarily represent the views of Money&Co.
This time last year I set out five developments I expected to see in peer-to-peer (P2P) lending within the crowdfunding sector. How much did I get right?
- Explosive Growth for Crowdfunding and P2P Lending
No surprises here. The report on alternative finance published by NESTA (National Endowment for Science, Technology and the Arts) and Cambridge University in the last quarter predicted huge expansion. But will P2P Lending (which is what we do) really make the £4 billion mark next year?
I went on to answer in the affirmative, based on conversations with leading Cambridge University academic, Bryan Zhang. He felt that £4 billion was conservative. There are no definitive figures as yet, but the £4 billion figure looks about right. As we recently reported, research from MarketInvoice indicates that lending P2P lending to small and medium-sized enterprises (SMEs) alone is set to hit £3 billion before close of play tomorrow. Bear in mind a lot of P2P lending is to individuals, not SMEs. See the full report here. We’ll bring you definitive figures as soon as we have them.
- Institutional Investor Support for Crowdfunding
Family offices (mini-investment offices that curate a rich family’s wealth), hedge funds and banks amongst others are hurrying to the P2P space. Santander already has a link with the biggest player in P2P lending, Funding Circle. Thin Cats is actively seeking institutional money. There’s a lot of institutional money behind our US equivalent company, Lending Club. It looks as though this will be mirrored over here. Personally, I hope the institutions don’t take the crowd out of crowdfunding.
Thin Cats got their deal – funding from Australia, and then a trade sale to a specialist P2P investment vehicle. Funding Circle, still the biggest player in our space, has raised working capital and is actively partnering with institutions for liquidity to go into the funding pot along with individual investors’ money.
- Clement Political Weather
The May General Election is almost an irrelevance. The Tories love our space. Lib-Dem Business Secretary, Vince Cable, is a huge fan, and has been very helpful. Labour is broadly positive too. My personal view is that the Conservatives will win a small outright majority in May. Coalitions, or one-party governments aside, the political risk for crowdfunding looks minimal to me.
I should have put money on a small outright Conservative win!
- First Flotations in P2P
I expect Funding Circle to announce its intention to float, probably in the third quarter of 2015. Samir Desai, its co-founder, is building a proprietary data set (we all need accurate data to help us assess risk when analysing borrowing companies) and is taking Funding Circle into the US market. An IPO, I believe, is inevitable.
I got the timing wrong. I still believe that an IPO is a certainty, with Finding Circle probably being the first – though summer 2016 now looks nearer the mark. There have been trade sales (Thin Cats) and failures (Trust Buddy). More on this in my subsequent predictions for 2016.
- Interest Rate Rises
Well, just the half-point in total. I predict two quarter-point rises from the Bank of England’s monetary committee. Governor Carney has the confidence of the markets, but any hint of rate rises or a cessation of quantative easing has been greeted by the market equivalent of hysterical, adolescent fainting. Nevertheless, Carney has prepped the situation well enough. We’ll see modest rises in the second quarter. I fear the banks won’t pass the higher rates on to their savers, though. No change there.
I got this wrong. There were plenty of market jitters, and many indications of imminent base-rate rises, but nothing materialised. The positive rise to the minor hike in US rates in the third week of December was unexpected – but surprisingly well received when it came.
Overall, I’d give myself 7.5 on 10 for accuracy. But who am I to judge? In my next blog, I’ll make five calls for 2016. Watch this space.
