Investing fundamentals vital for P2P

Investors must have a greater focus on investment fundamentals when it comes to peer-to-peer (P2P) investing, now the recent hype over the sector has settled down, an industry executive has said.

La Trobe Financial chief investment officer Chris Andrews revealed the firm still held concerns about new managers entering the space that are distracting investors, including SMSFs, with the buzz over fintech and algorithms.

“Investment fundamentals go to the heart of P2P discussions – P2P is essentially an investment, and what drives successful investment is an appropriate investment structure and good asset selection, so if you can tick those two boxes, you’ve started your due diligence,” Andrews told selfmanagedsuper.

“But people started to talk about algorithms, fintech, cloud, et cetera and if any other manager brought that technology to the market, everyone would be questioning how the algorithm works, if it’s been tested and proven, et cetera.

“These are the same fundamentals that are required when you look at P2P investment as they are with any other investment.”

He said he has observed less noise about P2P, which has enabled investors to assess the investment opportunities properly.

“Some of the initial hype and sensationalism on P2P has [died down], so there is now more of a sense that investors are taking a more steady and measured approach to it, that is, as something that requires an assessment based on its merits rather than the buzz of fintech, cloud and technology,” he noted.

“I think the sector has developed past that, but I’d repeat to investors to stay focused on the fundamentals.

“P2P is important and has a significant place, but if you’re looking at the hype and buzz of the sector, there’s a more realistic and sustainable assessment of the role of P2P for SMSFs moving forward.”

Away from the hype, P2P investing has proven a solid choice and has produced great results for investors, he said.

“It’s an opportunity for investors to get exposure to important asset classes, such as Australia’s residential mortgage sector, which is approaching $1.8 trillion in size,” he noted.

“Without something like a P2P functionality, that asset class is out of bounds for retail investors.”

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