New alternative investment index launches

Written by Lisa Stanley Mann on 15th November 2016

If you are bored with money, the usual ISAs, savings accounts, *yawns, pensions, then one way to spruce it up is to have a go at peer-to-peer lending or equity crowdfunding.

But if you decide to dig deeper and start to search around, the amount of choice can be quite baffling. There are literally hundreds of projects all clamouring for our small flutters of £50 here and there (or more substantial sums if we can afford it), on dozens of different platforms.

Thank heavens, then for OFF3R, a marketplace for alternative investments that has just launched an index allowing investors to track the financial performance of equity crowdfunds or P2P loans against others in the market.

Why is this good?

Developments such as this, and the inclusion of the ‘innovations in lending’ chapter in the latest Bank of England Credit Conditions Quarterly Review (sounds yawn but actually a good source of info), all help professionalise a sector that is truly starting to take on the banks at their own game.

After a few scandals late last year, all comparison data helps put increased power in the hands of you, the consumer, which will help grow this disruptive and exciting sector and offer you more choice and better access to information for what you do with your money, too.

In comparison to bank lending, the amounts going into the P2P and equity crowdfunding sectors are still relatively small, despite increasing steadily in recent years. In 2015, P2P lending to small businesses was equivalent to around 3 per cent of that lent by banks. Where it’s perceived that banks can’t or won’t lend to small businesses (unless at a very high rate), that’s where P2P and equity crowdfunding comes in.

And where institutional investors go, individual investors tend to follow. In 2015, institutional investors accounted for 26 per cent of total P2P funding to businesses.

The OFF3R index shows that equity crowdfunding has raised a combined total of £216.25 million and P2P a combined total of £2.6 billion.

Is your platform on the list?

The OFF3R index analyses the main equity crowdfunding platforms including Seedrs, Crowdcube, Syndicate Room, Angels Den, Envestors and The House Crowd. The P2P lending platforms included are Zopa, Landbay, RateSetter, ArchOver, Marketinvoice, Lending Works, Funding Circle and Thin Cats.

Lex Deak, CEO and co-founder at OFF3R said:“Traditional investors have had a tough year: interest rates hit record lows, inflation rates are set to increase and the economy is suffering from Brexit uncertainty. These events alongside low returns are encouraging investors to consider alternative investment options. The launch is part of our mission to educate and empower investors to make informed decisions and get better returns.”

“Over time we hope to see more standardisation in the way in which account and finance information is presented. This will make it easier for investors to be able to compare opportunities in the equity crowdfunding space.

“P2P continues to be popular with investors. The Government has bought into its potential and the market is increasingly robust.”

At Good with Money we also expect the P2P market to grow steadily following the launch on 1 November of the first range of Innovative Finance ISAs (IFISAs), which for the first time allow investors who lend to people and businesses via P2P platforms to do so completely free of tax, up to a maximum of £15,240 a year.

You can read our piece on the launch of the first Innovative Finance ISA from Abundance.  The renewable energy P2P platform, which has raised more than £20 million for 21 renewable energy projects around the UK, allows investors to start investing with as little as £5.

Key findings of the OFF3R Index

Equity crowdfunding

  • An average amount raised per month of £18 million across the seven platforms
  • 80,000 investments were made, with just fewer than 400 funded deals
  • October 2015 to December 2015 was characterised by a high growth trend, due to investor confidence in the asset class, a selection of large fund raisers and the state of the broader macro-economic environment
  • December 2015 was the best performing month of funding with £26 million raised
  • January 2016 to September 2016, represented an approximate 25 per cent drop off in raised activity between these months and the previous year
  • Two events during 2016 shows crowdfunding is an established player aligned with wider investment sentiment: the FTSE three-year low in January 2016 and the post-Brexit fallout

P2P lending

  • An average amount lent per month of £197 million across the eight platforms
  • April 2016 showed a seven per cent drop due to a number of factors, such as Lord Turner’s negative comments about the P2P market and Lending Club’s loan book discrepancies scandal
  • Slight drop in total lending throughout June and July 2016
  • August 2016 lending increased 20 per cent – the biggest month-on-month increase in their data
  • September 2016 was the strongest performing month with nearly £234 million being lent