Peer-to-peer (P2P) lending is proving its resilience as an asset class, which in turn is drawing more interest and flows from SMSFs.
“Given the current economic environment of historically low interest rates and volatile equity markets, we’re seeing many SMSF investors seek high-quality investments which offer strong, stable returns,” RateSetter chief executive Daniel Foggo told selfmanagedsuper.
“P2P lending fits the bill here, offering investors returns of up to 10 per cent in an asset class that is proving to be very resilient.
“With [last] week’s reduction in the cash rate and the banks responding by aggressively reducing returns on deposits, the appeal of the high yield on offer from P2P lenders is only getting more compelling for SMSFs.”
Last Thursday, RateSetter revealed it had reached 3000 Australian lenders joining its platform since its launch in 2014, an increase of about 50 per cent over the past six months.
Significant growth had come from SMSF investors, retirees and pre-retirees seeking yield with low relative risk.
According to an analysis of RateSetter data, SMSFs lent an average of $57,300, substantially higher than the average lender investment of $16,450.
“We think that over time this number will steadily increase as lenders become more comfortable with P2P lending as an asset class and the strong risk-adjusted returns it can deliver,” Foggo said.
“The average of $57,000 hides the fact that quite a few SMSFs only recently signed up, so are yet to allocate their funds to RateSetter.”
To date, SMSF investors have funded around 15 per cent of all amounts lent via RateSetter, Foggo revealed.
“Although the proportion is growing quickly, with SMSFs funding closer to 25 per cent of our loans last month,” he said.
“We expect this growth to continue as SMSFs become increasingly aware of P2P lending as an asset class and RateSetter’s unique offering.
“People are learning about P2P lending and RateSetter from a wide range of sources – about 10 per cent of our SMSF investors are introduced to RateSetter via their adviser, and we expect that number to grow significantly as advisers become increasingly aware of RateSetter and P2P lending.
“For other SMSF investors, they’ve seen our marketing or read about P2P lending and are attracted by the idea and the opportunity to directly access an asset class that has previously been difficult to access.”
He also said existing lenders were some of the company’s strongest advocates.
There were a number of aspects of RateSetter’s offering that SMSF investors were finding particularly appealing, including its unique Provision Fund, which holds over $1.5 million to protect investors against late payments and defaults, control via its simple online interface, and transparency, with its loan book and credit performance information regularly released to the public.
“Our SMSF lenders are relatively active lenders, with many of them accessing the platform several times a week to look at real-time performance data, monitor lending market activity and manage their lending orders,” Foggo said.
“And SMSF investors love that they can get a clear view of our credit and returns performance on a real-time basis.”
He said there was a broad range of SMSF investors lending on RateSetter, aged between 26 and 75, representing both pre and post-retirement investors, with investments ranging in size from $1000 to more than $500,000.
