Peer-to-peer (P2P) lender SocietyOne has experienced growth in interest from SMSFs as investor funders, but believes it will take time to properly educate the sector on the emerging alternative asset class.
“We’ve certainly seen an increase in the number of individual investors and a lot of that is through their SMSF, absolutely, but I think it’s only early days with SMSFs and the super community – you can see that in the asset allocations of SMSFs,” SocietyOne chief executive Jason Yetton told a media roundtable in Sydney today.
“Everyone has recognised the problem of how to get real fixed income and better yield … but the thing about SMSFs is that they control [their fund] and they invest in what they know.
“Part of it is that people think it’s new, but it’s as new as banking, in reality, but it’s not the vanilla property and Australian shares top 10 stocks, so in that sense it’s new to many.
“And that’s part of the challenge in scaling up.”
SocietyOne’s investor funders comprised a mix of institutional investors and sophisticated clients, including SMSFs.
In December, the company reached $200 million in total lending since inception.
Yetton said the P2P lender provided investor funders with a strong opportunity, with a 10.34 per cent average annual return across both loan portfolios, net of losses and fees.
Furthermore, 73 per cent of investor funders validated their experience by reinvesting interest and/or capital repayments.
“We’ve been very successful with high net worths, credit unions and institutions, but we do want to see what other long-term funding sources, like SMSFs, [there are] and how we spread the word around that, and also start the education process,” he said.
“We think this is a real asset class for these segments and we’d like to grow that.
“Most of our clients have come from those who have started and then have referred their friends or family to contemplate it based on their experience, and that’s probably the most powerful thing.
“It’s like any fund management business – it takes a while for people to trust the track record and for the brand to build up and for the word to spread.
“We’re not set up with intermediaries and commission structures, so it’s really catering to the self-directed market that is looking for a better return.”
He said as yield plays in asset classes come and go, one of the issues in running a business for the long term was looking for investor funders who similarly had long-term interests.
“It’s got big appeal for superannuation, whether that’s industry or retail funds, and big appeal to SMSFs, certainly for retirees looking for real yield,” he noted.
“It’s a valid income credit alternative asset class. Ultimately, this is about customer experience and a matching process that delivers a better deal for both sides – investor funders and borrowers.”
SocietyOne was founded in 2011.
According to the Australian Prudential Regulation Authority, the consumer finance market is worth $100 billion, excluding housing.