Will US Rate Rise Hit Peer-to-Peer Lending Sector?

The peer-to-peer lending sector offers income investors yields of up to 7%. But investors need to be aware of potential risks on the horizon

Karen Kwok 9 February, 2017 | 3:55PM

Peer-to-peer (P2P) lending has offered some attractive return to income investors in recent years. While investors can gain direct exposure to the P2P sector, many choose to invest through specialist investment trusts.

Rising interest rates in the US could hit this sector – but Simon Champ, manager of P2P Global Investments (P2P) told journalists in London on Wednesday that he is not unduly concerned about the effect this will have on returns.

“As the average life of the loans we own is very short – that is about one to three years -  we are able to steer the book even if economic policy changes. We can get back 3-4% of loans in a month, coming back in cash and reapplying that to other loans. So we are not worrying about what is happening in the US as we have the ability to move the trust weighting to different areas as a fiduciary,” he added.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
LendingClub Corp4.73 USD4.88
Pollen Street Secured Lending Ord864.00 GBX-0.69
SME Credit Realisation Fund59.00 GBX-3.67

About Author

Karen Kwok

Karen Kwok  is a Reporter for Morningstar.co.uk

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