Alternative Credit Investor April 2024

Private debt fundraising to rebound in 2024

PRIVATE debt fundraising activity is predicted to pick up again this year, after a dip in inflows in 2023.

According to PitchBook’s 2023 annual global private debt report, private debt fundraising activity from institutional investors totalled $190.9bn (£150.4bn) last year.

The research firm

expects the true total to breach $200m, as data from late reporting funds trickles in.

This is a “substantial” figure but it is likely to equate to a 10 per cent year-on-year drop in fundraising activity, PitchBook said, due to a weak second half of the year when just $76.7bn was raised.

It partly attributed this

to large funds staying open for longer. The average time to close a debt fund has risen to 20 months in 2023 from just 13.5 months in 2016.

Industry perception of the current fundraising landscape is mixed.

Investor relations professionals at some private credit fund managers have told Alternative Credit

Investor of challenging fundraising conditions.

But other stakeholders have suggested that the challenges vary depending on the funds’ strategies and the track record of the manager.

And a London-based private funds lawyer said their clients expect conditions to improve in the second half of 2024.

Despite last year’s >> 4

Earn up to

12.68% p.a. * †

Kuflink invests up to 5% with you

Secured against UK property*

Secondary market available

Operating since 2016 with Zero Investor losses to date

IF-ISA Tax wrapper available

Visit kuflink.com or Call us at 01474 334488

*Don’t invest unless you’re prepared to lose money. This is a high-risk investment. You may not be able to access your money easily and are unlikely to be protected if something goes wrong.

† Gross annual interest equivalent rate (compounded annually (Pool) / monthly (Select))

Kuflink Ltd (Company Number 08460508) is authorised and regulated by the Financial Conduct Authority since 2017 (Firm Registration Number 724890). Kuflink Ltd has its registered office at

21 West Street, Gravesend, Kent DA11 0BF, United Kingdom.

124 City Road, London, EC1V 2NX info@royalcrescentpublishing.co.uk

EDITORIAL

Suzie Neuwirth

Editor-in-Chief suzie@alternativecreditinvestor.com

Kathryn Gaw Contributing Editor kathryn@alternativecreditinvestor.com

Marc Shoffman Senior Reporter marc@alternativecreditinvestor.com

Selin Bucak Reporter

PRODUCTION

Tim Parker Art Director

COMMERCIAL

Tehmeena Khan Sales and Marketing Manager tehmeena@alternativecreditinvestor.com

SUBSCRIPTIONS AND DISTRIBUTION tehmeena@alternativecreditinvestor.com

Find our website at www.alternativecreditinvestor.com

Printed by 4-Print Limited ©No part of this publication may be reproduced without written permission from the publishers.

Alternative Credit Investor has been prepared solely for informational purposes, and is not a solicitation of an offer to buy or sell any peer-to-peer finance product, or any other security, product, service or investment. This publication does not purport to contain all relevant information which you may need to take into account before making a decision on any finance or investment matter. The opinions expressed in this publication do not constitute investment advice and independent advice should be sought where appropriate. Neither the information in this publication, nor any opinion contained in this publication constitutes a solicitation or offer to provide any investment advice or service.

The legal battle between Barings and private credit upstart Corinthia Global Management has had the industry captivated in recent weeks.

Corinthia has poached more than 20 senior executives from Barings’ private credit team, in what has been described in legal filings as “one of the largest corporate raids at an asset manager in years”.

At the time of writing, the lawsuit was in full throttle, with Barings seeking to prevent Corinthia from luring over more of its staff (or clients) and claiming damages for the team raid.

The debacle highlights the spectacular growth of the $1.7tn (£1.3tn) private credit industry and intensifying competition for talent.

Earlier this year, it emerged that top private credit professionals are now among the highest earning executives in Europe, earning an average of €13.7m (£11.7m) last year, according to executive search firm Heidrick & Struggles.

As asset managers, private equity firms and investment banks all tussle for a piece of the action, it’s unsurprising that the demand for expertise in private credit is at an all-time high.

With more talent rising up the ranks, let’s hope that firms can find a less controversial way to expand their private credit teams than Corinthia has done and avoid a legal quagmire.

SUZIE NEUWIRTH EDITOR-IN-CHIEF

cont. from page 1

dip in fundraising, investor interest in private debt remains high.

Private debt assets under management (AUM) neared $1.9tn inclusive of retail funds, with direct lending continuing to drive the sector’s explosive growth. The strategy surpassed $540bn in AUM in 2023, up from $70.8bn 10 years ago.

Increasing demand for private debt from new types of investors is expected to help drive growth in 2024. PitchBook noted that investment from “nontraditional vehicles and sources”, such as semi-liquid funds for retail and separately managed accounts for insurers, picked up steam in the second half of 2023. In the case of the seven largest managers that trade publicly, these channels account for nearly half of all fundraising for credit strategies.

Retail investors put $29.7bn into private debt funds in the second half of the year, up from $17.1bn in the first half.

“These are new addressable investor markets that these larger managers are doing a good job penetrating,” PitchBook said.

The income-generating

aspect is what draws many investors in. A survey published last month by Adams Street Partners found that 81 per cent of respondents are looking to allocate up to 20 per cent of their private investments to private credit.

“The flexibility offered by private credit providers, coupled with attractive returns from floating-rate structures and greater lender protections, make the asset class highly favoured by investors and borrowers,” noted Jeffrey Diehl, managing partner and head of investments at Adams Street Partners.

There is clear interest in allocating more to private credit funds, particularly from European investors such as pension providers.

Danish pension fund Industriens Pension recently partnered with Nordea Asset

Management on a new private credit fund, with senior portfolio manager Lene Boserup saying she expects the investment to provide a “solid and attractive return at a relatively low risk”.

Meanwhile, a recent survey by Downing found that 94 per cent of UK pension providers want more exposure to private credit. And Goldman Sachs’ European Pension Survey found that seven in 10 managers believe private credit has the potential for increased returns without a rise in volatility. Two thirds of those surveyed plan to allocate to private credit over the next three to five years.

The returns on offer make the sector highly attractive to a wide range of investors. PitchBook said that 2023 was an exceptionally strong year for floating-rate leveraged

loans, which represent the bulk of private debt fund holdings. The US Morningstar LSTA Index, which is a good proxy for how these loans performed, went up by 13.3 per cent last year – the highest annual reading since the global financial crisis (GFC) and the secondstrongest return ever.

The equivalent index for Europe posted a nearly identical 13.5 per cent return, also a post-GFC high.

“These persistently high yields explain the continued attraction and strong relative performance of private debt funds,” PitchBook said. “Many are originating loans at yields that are equal to or higher than the bankled syndicated market, which has retrenched significantly outside of refinancing and repricing activity.”

France’s Eiffel to launch impact unitranche fund

EIFFEL Investment Group is launching the first impact unitranche fund for smaller funds.

The Paris-based asset manager focuses on sustainable investments. It manages around €6bn (£5.1bn) of assets, half of which is invested in private debt and €2bn of which is committed to energy transition.

Eiffel’s private debt investments typically focus on senior debt for SMEs in Europe with annual EBITDA ranging from €50m to €100m.

The firm has historically done some unitranche deals for smaller companies, but this is first time that it will have a dedicated impact unitranche fund.

“We’ve done unitranche funding in a more generalist fund for a long time but this will be the first dedicated impact strategy,” Fabrice Dumonteil (pictured), chief executive of Eiffel, told Alternative Credit Investor.

“Looking at the unitranche market, the funds have become huge and therefore have had to focus on larger companies, so the segment below €20m EBITDA is much less crowded. We feel there is a funding gap there, financing smaller firms with €5-10m EBITDA on average.

“Sustainability-linked financings have been generalised for larger companies but for smaller ones that’s not the case. They need to transition, to decarbonise and to finance their green efforts, which is what we can help with.”

Dumonteil said that Eiffel has started to gather interest from investors and expects to announce the first closing in the coming weeks.

Wealth market potential

Private debt fund managers are increasingly tapping into the wealth market in order to diversify their sources of funding and meet their

growth ambitions. Apollo Global Management has been vocal about its plans to raise $50bn (£39.3bn) from the wealth market for its private capital products by 2026.

Around 15 per cent of Eiffel’s overall asset base is retail and Dumonteil sees huge potential in the wealth market.

“We’re launching retail products in all our strategies,” he said. “We have not done it yet for private corporate debt, although this is in progress.

“We have raised almost €350m for an energy transition infrastructure [retail or unit-linked] product that we launched last year.

“The potential of the wealth market is fantastic. Our renewable infrastructure fund is an evergreen fund so it can only grow. In three to five years it could be our largest fund, larger than our institutional vehicles.”

A new law unveiled in France late last year should give private markets investment managers a boost, Dumonteil added.

“In France, the new ‘Green Industry’ law will mandate life insurers and retirement contracts provided by insurers to include a minimum percentage of private assets,” he said. “This will be a big driver.

“We’re seeing a lot of interest from investors in the new law. The good news is that the younger generations, who have significant savings, really like the idea of financing real assets, especially those that are energy transition related and impact driven.”

Dumonteil expects Eiffel to grow its institutional and retail products in the coming years, as it expands both in France and internationally.

“Our retail strategy will provide a second growth engine,” he said. “In the long run, it could be the same magnitude of €1bn a year that we raise through institutional channels.”

Keep abreast of the latest news and updates on the fast-growing alternative credit market by connecting with Alternative Credit Investor magazine on social media.

Twitter/X:

https://twitter.com/altcreditnews/

Facebook:

https://www.facebook.com/alternativecreditinvestor/

LinkedIn:

https://www.linkedin.com/company/ alternativecreditinvestor/

Instagram:

https://www.instagram.com/ alternativecreditinvestor/

Access our website at alternativecreditinvestor.com.

Maturity wall fears overblown but isolated incidents will occur

CONCERNS about an imminent maturity wall presenting risks to private credit markets is slightly overblown, according to industry insiders.

But there are some companies that will face challenges.

“This idea of an imminent maturity wall is not something to be very concerned about in the near term,” Bill Cox, global head of corporate, financial and government ratings at KBRA told Alternative Credit Investor

Although there have been warnings from central banks and rating agencies about risks due to upcoming maturities, the credit ratings agency found that only 10 to 15 per cent of total loans in the market are set to mature over the next two years. The group analysed more than 1,800 middle market private credit borrowers representing over $750bn (£591bn) of debt.

Cox said that there will probably be incidents of companies running into some trouble, but these will be isolated.

“For companies whose loans are maturing, some of those companies certainly are going to be facing a much higher interest rate environment

which means their refinancing is going to come at lower valuations, all else being equal,” he said. “There is a minority of companies that haven’t grown as much and maybe will be challenged in a refinancing environment to get the amount of debt.”

Interest coverage is particularly being suppressed in the software sector, Cox pointed out, with companies starting now to feel the pressure, leading potentially to difficult conversations between sponsors and lenders. In some cases, lenders are happy to take the keys unless sponsors put more equity into companies.

“In the situations we hear about or have been involved with, it seems like the lender has consistently had a very

strong position to assert their rights,” Cox said.

Property woes

Specific concerns have been highlighted around the beleaguered commercial real estate sector, with around $2tnworth of these loans in the US maturing over the next couple of years. However, some industry stakeholders think that these fears are overhyped.

“A lot of those loans that matured last year ended up getting extended, so lenders are now experienced in extensions,” said one commercial real estate debt executive at an asset management firm.

“The loans that we’re seeing that are refinancing were originated in 2014 with coupons of around 4.5 per cent, so it’s not a huge increase for them to go to 5.5 per cent or

six per cent, particularly when they’ve had 10 years of opportunity to increase cash flow on the property.”

Being proactive

Although in the nearterm, upcoming maturities should not lead to widespread defaults, there are a significant number of maturities coming due between 2026 and 2028. However, KBRA believes that borrowers will be proactive in refinancing their debt, and the percentage of loans coming due in those years should also decline over time.

While the percentage of defaults has not been significant so far, that is against a much larger base of loans than the industry had in any previous cycle, according to Cox. And that means that it is a significant number of companies that are defaulting.

This could put a bit of pressure on lenders as they will be dealing with a larger number of borrowers in trouble. In Cox’s opinion, one of the big risks in the market is therefore, a “human capital risk”. Private debt groups will need more people to deal with workouts and special situations.

More work to be done on IFISA reform

KUFLINK HAS CALLED for more work to be done to improve access to the Innovative Finance ISA (IFISA), as new rules broaden the scope of the tax-efficient investment wrapper.

From 5 April 2024, IFISA legislation has been changed to allow investors to open more than one IFISA with a new provider per year, in a reversal of the previous rule. Investments in open-ended property funds and Long-Term Asset Funds (LTAFs) have also now been added to the IFISA remit.

Narinder Khattoare (pictured), chief executive of Kuflink, has welcomed the newly-adopted changes to the IFISA offering, but believes that there is still a lot of untapped potential in the IFISA market.

“Its good to see that the ISA has been extended and that investors get more of a tax efficient wrapper to put into their savings,” said Khattoare.

“But we think there is more that needs to be done in the alternative space to encourage investment. Most people still don’t know about the alternatives to cash ISAs, where rates are still quite low.

“By comparison, propertybacked IFISAs target much higher rates, and the investments are secured.”

Kuflink has offered a propertybacked IFISA since 2017, and has had more than £92m invested with zero losses to date. At present,

the platform is offering a two year IFISA with returns of up to 10.06 per cent; a three year IFISA with returns of up to 8.66 per cent; and a five year IFISA with returns of up to 8.05 per cent.

The platform’s investors have been effusive in their praise of Kuflink online, with more than 1,000 users giving the platform an ‘excellent’ score on TrustPilot.

“Our investors like that they can see where their money is diversified, across which loans and locations across the UK,” says Khattoare.

“We provide a personal service unlike some of our competitors, so they always have a person they can talk to as and when they need to. We also have a high street presence so people can come in and talk to us in our office.”

Kuflink’s IFISA has evolved over the years as regulation and legislation has changed, but the security element has remained the same.

“The only thing that has changed with us is the number of years people can lock their money away for,” says Khattoare.

“Pooled auto-investments can now range from two, three and five years, while our select IFISA wrapper allows investors to put money into individual deals.”

Yet despite the clear opportunities and growth of the IFISA market, a lack of government support and ongoing marketing restrictions have

kept IFISA investment volumes relatively low across the UK.

During the 2021/22 tax year (the most recently-available data) just £144m was invested into IFISAs, and just 17,000 new accounts were opened. This compares with 7.1 million cash ISA accounts, and 3.9 million stocks and shares ISAs.

Khattoare is among those industry leaders who believes that the IFISA should be much more popular among discerning investors by now, many of whom have never heard of the product.

“There needs to be more IFISA education and awareness from the nationals,” he says.

“Peoples’ default mode is to use a tier 1 or tier 2 bank but get lower returns. Most people are reluctant to go outside of these banks due to a lack of knowledge and awareness.

“The government could do more if they really wanted to help the alternative sector and UK-based businesses by bringing out a bigger ISA wrapper in the alternative space so investors can diversify their savings from the high street banks.”

According to research by Alternative Credit Investor, the average IFISA has returned an average of between seven and nine per cent each year since the tax-wrapper was launched in 2016. This is a remarkably consistent record when compared with stocks and shares ISAs, and considerably higher than the average returns

offered by cash ISAs.

Khattoare says that Kuflink will never be the platform offering the highest returns on IFISAs because its priority is risk management, and minimising the possibility of borrower defaults. This strategy has clearly paid off to date.

“Our rates are obviously dependent on the Bank of England’s Monetary Policy Committee decisions and market conditions, but there is also an element of what our competitors are doing,” says Khattoare.

“We are never going to be the lender that charges the highest

rates to borrowers or offers the highest return to investors, but we have a good track record with people providing very good feedback via TrustPilot and we listen to feedback from all of our investors.

“Our investors have told us that they like our rates, they like the offer of auto and select accounts, and they are very satisfied with our terms.”

However, Khattoare still sees limitations around the IFISA market. He points out that the process of transferring ISAs is still very slow, while

the £20,000 annual ISA investment limit is too low.

“If I were chancellor, I would up the wrapper amount significantly so more people could save in a more tax efficient way,” says Khattoare, adding that the ideal ISA limit should be closer to £35,000 rather than the current £20,000.

“I feel that more people would take advantage of the ISA and diversify more of their funds if there was a higher limit,” he adds.

“The transfer process should be digitalised and that’s something I would make mandatory across the sector within the next 18 months.”

This year, Khattoare does not expect to see much of an increase in IFISA inflows, although this may change if the updated IFISA rules grab the attention of the media and the wider investment community. With the addition of open-ended property funds and LTAFs, more brokers are expected to look at the IFISA for the first time, and this could lead to an influx of interest in the tax wrapper.

As one of the earliest IFISA managers, Kuflink has a long and impressive track record of delivering IFISA returns, but Khattoare is aware that the current limitations of the IFISA market could hinder future growth.

“It’s harder for newer investors to get in due to the marketing restrictions required to stay compliant with the Financial Conduct Authority,” he says.

“This market can only significantly grow if some of the mainstream press pick it up and the government pushes this more – I just don’t see either of those things happening any time soon.”

Deep impact

Impact investing is making its mark on the private credit space.

Kathryn Gaw and Suzie Neuwirth report

IT IS NO LONGER ENOUGH to simply offer investors a decent return on their money. Impact investing is on the rise, with a number of private credit funds available that advertise their green and ethical credentials. The private credit sector’s push towards the wealth market is set to accelerate this trend, as individuals prioritise both planet and profits.

Towards the end of last year, BlueOrchard – an impact investment manager which is part of the Schroders Group – launched an impact credit fund dedicated to improving financial inclusion worldwide.

A month later, BNP Paribas Asset Management launched a climate impact infrastructure debt fund, designed to finance climate change mitigation. In January of this year, Allianz Global Investors raised €300m (£257m) from approximately 10 European investors in the first closing of its latest European private credit impact fund. And Avenue Capital has spoken about its imminent plans to launch a fund targeting private credit investments which

have an environmental impact.

Earlier this year, impact investment adviser Phenix Capital Group reported that private debt impact funds had raised €45bn in total capital, with this figure expected to rise as more fund launches take place.

“Traditionally, impact investing was primarily centred around impact equity, but the past 10 to 15 years have witnessed a notable rise in impact credit funds,” says Jim MacHale, a partner in Clifford Chance’s global private credit practice.

“Unlike the conventional ESG approach, impact credit focuses on lending to businesses capable of delivering significant and measurable social and/ or environmental impact while ensuring financial returns.

“This approach proves advantageous for businesses seeking capital for growth without experiencing dilution of shareholding/control, a common outcome in impact equity investments.

“The growing popularity of impact credit makes it a relevant

“ The growing popularity of impact credit makes it a relevant and sought-after avenue in the private credit space”

and sought-after avenue in the private credit space.”

According to a recent report from Allianz Global Investors on impact credit funds, the rise in demand is being fuelled by a sense of inequality, climate change and Covid-19. Unlike traditional ESG-themed investments, impact investing is intended to generate “lasting material positive change,” the Allianz report said. But this language leaves a lot of room for interpretation.

ESG investing started to grow

in popularity around 15 years ago, and the acronym is now a common feature in most portfolios. PwC has estimated that by 2027, ESG assets are on pace to constitute 21.5 per cent of total global assets under management. With such a wealth of opportunity available for qualifying investments, it is no wonder that there has been a green-rush in the space.

“While financial return is still the main driver for most investors, impact is becoming seen as an increasingly important

characteristic and more investors are looking to incorporate such a dynamic into their portfolios,” says Aaron Hay, director of sustainable investment, private credit, Fidelity International.

“Though impact has been a more familiar concept within equity in the past, we are now seeing more credit products starting to drive impact through not only lending to well-developed companies but also working with companies at an earlier stage of their sustainability path to speed

up their sustainability credentials alongside financial metrics.”

Beware of greenwashing

However, while demand is currently robust, investors are acutely aware of the risk of greenwashing and fund managers are working hard to ensure that their impact products are having the desired effect.

For Fidelity’s Hay, a good impact credit fund should have a clearly defined theory which covers: what the impact will be; how the impact will be

executed, while sitting alongside and supplementing financial returns; and how impact will be measured and reported upon.

“To help with the definition of impact, one can also use defined parameters and already widely accepted frameworks such as the 17 UN Sustainable Development Goals (UN SDGs), which will allow you to link the impact achieved to more concretely defined objectives, and also thus may make it easier to measure and report upon,” says Hay.

“‘Impact’ can occur within the confines of the borrower, or it can happen for external beneficiaries (i.e. customers, communities, or the planet) and in some instances, impact can be realised both internally and externally. The most important thing is that the lender needs to clearly stipulate what kind of impact is expected to be achievable as well as measurable, and over what time period.”

Hay warns that the risk of greenwashing is higher on impact funds where strategy and objectives are not clearly defined.

“This is why it is really important to be clear from the beginning what the objectives are, how they will be achieved and also how they will be reported upon,” he says.

Hay adds that impact fund managers should set up a strategy where they can evidence each investment contributing to a positive and measurable impact; whether it is environment more broadly or any other more specifically defined area of focus.

“Think about how each deal is structured, i.e. for a credit fund being able to evidence impact, the desired end result needs to be built into the terms of the deal to ensure that impact in each instance has a concrete basis so that it can be

“ Investors need a robust impact methodology to ensure impact as well as returns are achieved”

tracked and reported upon,” he says. Fidelity and Allianz GI both follow impact investment strategies in line with the UN SDGs, as well as their own internal impact frameworks. For Allianz, this framework involves establishing clear impact objectives, assessing impact materiality, identifying key performance indicators, and

continuously testing the approach.

“To maximise the possibility for positive change, investors need a robust impact methodology to ensure impact as well as returns are achieved,” says Nadia Nikolova, lead portfolio manager, development finance at Allianz Global Investors.

“An impact manager would have a clear impact framework and both

credit and impact would be assessed hand-in-hand. After the investment is done, oversight is important which imply monitoring and reporting along a relevant set of KPIs.

“Requiring borrowers to provide regular financial reporting and comply with certain financial tests is one of the common ways lenders monitor and influence the financial performance of borrowers. Lenders can take a similar approach when providing funding for environmental or social issues. This means incorporating impact reporting requirements and

impact covenants or incentives into credit documents to safeguard the use of funding and to incentivise the acceleration of impact generation.”

Impact investing has attracted its critics. Last year, Larry Fink, chief executive of the world’s largest asset manager BlackRock, famously said that he had stopped using the term ESG as it had become too politicised. Republican politicians have blasted ESG credentials as a way of the corporate world to advance a politically liberal agenda, while Democrats are typically

in favour of the framework.

Speaking at the Aspen Ideas Festival, Fink said that the term had been “entirely weaponised…by the far left and weaponised by the far right”.

This issue of politicisation is not isolated to the US.

Some private credit industry stakeholders have told Alternative Credit Investor that investors in Europe are eschewing products that are labelled as ESG or impact, as they are too aligned with the left-wing movement.

But these concerns have not been enough to impede the skyrocketing growth of the asset class, particularly as it expands into the wealth market.

Fabrice Dumonteil, chief executive of Paris-based sustainable asset manager Eiffel Investment Group, said that younger investors are particularly interested in the ethics of their portfolios.

“The good news is that the younger generations, who have significant savings, really like the idea of financing real assets, especially those that are energy transition related and impact driven,” he says.

And Allianz Global Investors’ Nikolova also sees “huge growth potential” in impact credit.

“Large investments are required to tackle the main challenges of today and impact investing can be one of the keys,” she says.

“We see huge growth potential for impact credit, both on the growing investable opportunities set and strong interest from our customers.

“Investors are becoming more convinced that impact investing is no longer at the expense of a return sacrifice. In addition, private credit has been a very well performing asset class.”

Folk2Folk IFISA to remain P2P focused

FOLK2FOLK’S INNOVATIVE Finance ISA (IFISA) will remain focused on secured peer-to-peer lending investments, despite recent changes to the IFISA remit.

From 6 April, the IFISA will be extended to cover open-ended property funds and long-term asset funds (LTAFs) in addition to P2P loans. This has led to speculation that some IFISA managers could expand their offerings. However, Roy Warren (pictured), managing director of the UK’s largest P2P lender Folk2Folk, says that his platform will stay true to its P2P roots.

“The new rules mean that there will be a greater range of permitted investments beyond P2P lending that can be held within an IFISA which will likely raise the profile of this little-known ISA,” said Warren.

“However, investments into P2P loans will remain the only investment option within Folk2Folk’s IFISA.”

The new ISA rules for 2024 also allow investors to open and contribute to multiple ISAs of the same type within the same tax year, and to make partial transfers between ISA providers where previously they would have had to transfer the full amount. This has fuelled hopes of an influx of new money into IFISAs in the year ahead.

Folk2Folk has in excess of £60m invested via its IFISA, with a current interest rate starting from 8.75 per cent per annum.

“We have seen steady growth in our IFISA since its inception, reflecting strong investor confidence in our platform and the quality of the loans we facilitate,” says Warren.

“Competitive returns and a focus on secured lending has helped us maintain an attractive proposition for investors seeking to balance risk and reward.”

Folk2Folk’s IFISA investments are used to fund regional UK businesses, creating jobs, building homes and supporting local economies at a time when traditional bank lending has been constrained.

“By providing a platform for investors to lend directly to businesses, we've facilitated in excess of £674m in funding to small- and medium-sized enterprises (SMEs) across the country,” says Warren.

“The positive impact of these investments contribute to the economic recovery our country needs.”

In his Spring Budget, the Chancellor also proposed a British ISA, which would give investors an extra £5,000 allowance to invest in UK shares on top of the current £20,000 ISA allowance. Warren says that this is a clear move by the government to encourage greater investment in UK-listed businesses. However, he points

out that Folk2Folk’s IFISA is currently performing the same function for unlisted SMEs.

“Both the Folk2Folk IFISA and the British ISA support British businesses, but a key difference is that Folk2Folk’s IFISA channels investment into unlisted SMEs, enabling our investors to have a positive impact on small- and medium-sized businesses not large enough to be listed on the London Stock Exchange,” he says.

Warre adds that feedback received from Folk2Folk’s IFISA investors via a recent survey was “overwhelmingly positive.”

“They appreciate the combination of tax efficiency, competitive returns, and the tangible impact their investments have on UK businesses and communities,” he says.

“Investors are pleased with the ease of use of our platform and the personalised service they receive from our team. However, we also listen carefully to suggestions for improvement, and we're committed to continually enhancing our offerings and the investor experience.”

easyMoney: Property lending market “extremely positive”

THE UK PROPERTY lending market looks “extremely positive” with property prices rising and demand set to grow.

According to Jason Ferrando, chief executive of property-backed peer-to-peer lending platform easyMoney, 2024 will see a property market recovery after a prolonged period of stagnation. This will drive interest in property-backed investments such as easyMoney’s Innovative Finance ISA (IFISA).

“The year ahead is looking extremely positive given the economic turbulence of the last year and the fact that interest rates still remain considerably higher than we’ve seen in recent years,” says Ferrando.

“While we’re unlikely to see the market accelerate at the same pace as we did during the pandemic, we expect a slow but steady rate of growth to persist as demand continues to outweigh supply.”

The UK property market has been in turmoil since the infamous mini-Budget of late 2022, which brought a great deal of uncertainty to the UK economy and had a knock-on-effect on the property market. Furthermore, rising interest rates put pressure on buyer purchasing power, causing property demand to slow.

“2023 certainly posed a more challenging year for the property market,” says Ferrando. “As a result we saw house prices begin to decline with property transaction numbers falling consistently between January and July of last year.

“However, with the base rate being held at 5.25 per cent since August of last year, stability has started to return to the market

and we’ve already seen concrete signs that market health is improving. This growing market confidence has been helped by a reduction in inflation which sat at four per cent in January versus 10.1 per cent a year previous.”

This uplift in market activity is also starting to show with respect to house price growth. The latest sold price data from the Land Registry shows that house prices climbed by 1.4 per cent in December of last year, while mortgage approval house prices from Halifax and Nationwide show that in February of this year house prices were up by 1.4 per cent and 1.7 per cent respectively, year-on-year.

“Investors can take advantage of improving market conditions in many ways,” explains Ferrando.

“Utilising property-related investments via alternative investment vehicles such as an IFISA is one way of doing so, allowing investors to invest from a far lower entry point than the cost of purchasing a property.

“Other options include property funds, REITs, or by purchasing shares in property

related companies such as housebuilders or agents.”

Investors can open an easyMoney IFISA with as little as £100, and can start investing in property-backed loans paying interest rates of 5.53 per cent and higher. Ferrando’s team has a combined total of more than 100 years experience in the property market. Ferrando himself has been in the lending space for 30 years, with a flawless track record thanks to his attention to detail.

“easyMoney has a diligent and robust underwriting process,” says Ferrando. “We have third party valuations on every deal. We have an experienced credit committee that looks over every deal and tranche payment individually, and we have a team of professionals on the ground visiting sites regularly to keep up to date with the progress.

“Our loan servicing team is in constant contact with the borrowers to make sure they are happy and are on target.”

With this focus on due diligence and long track record in the sector, easyMoney is well placed to take advantage of any upcoming property market growth.

Assetz Exchange is a property investment platform delivering long term stable income for investors, primarily through the purchase and leasing of housing for social good. Regulated by the FCA, it provides the opportunity for investors to create a diversified property portfolio and alternative funding options for the housing sector.

www.assetzexchange.co.uk

T: 03330 119830

E: info@assetzexchange.co.uk

easyMoney is a peer-to-peer property lending platform that is fully authorised by the Financial Conduct Authority #231680. It has £164m+ in investor funds currently deployed and £280m+ in total loans written to date. It has had no borrower defaults and no investor has ever made a loss. Among P2P firms surveyed by Alternative Credit Investor it has the largest active Innovative Finance ISA portfolio, with over £66m currently invested.

easyMoney.com

T: 0203 858 7269

E: contactus@easymoney.com

Folk2Folk is a profitable UK lending and investment platform. More than half a billion pounds has been invested via the platform with no investor losses to date. Loans are a maximum of five years, secured against land/property at a maximum 60 per cent LTV, with a fixed rate of between 7.5 and 9.5 per cent, per annum.

www.folk2folk.com

T: 01566 773296

E: enquiries@folk2folk.com

Invest & Fund is an established alternative finance platform that has deployed over £257m on clients' behalf and has repaid over £158m to lenders with zero per cent bad debts written off. Lenders can achieve a diversified, asset-backed portfolio with gross yields averaging from 6.75 per cent to 7.5 per cent per annum with an option to lend through an ISA or a SIPP for tax-free returns.

www.investandfund.com

T: 01424 717564

E: lending@investandfund.com

JustUs is an innovative peer-to-peer lender that provides a range of consumer and property-backed loans. It has lent out more than £25m and paid more than £1.7m in interest to lenders to date. Investors can enjoy returns of up to 10.98 per cent, with all products eligible to be held in an Innovative Finance ISA for tax-free earnings.

www.justus.co

T: 01625 750034

E: support@justus.co

Kuflink is an award-winning lender and online investment platform. With over £280m invested through the platform, investors can customise their own portfolio investing in specific loans or in a pool of loans diversified across a number of opportunities. Earn up to 9.73 per cent (compounded) per annum, with an IFISA available.

www.kuflink.com

T: 01474 33 44 88

E: hello@kuflink.com

LANDE is a crowdfunding platform that gives investors access to secured agricultural loans. It has created a unique scoring model, accessible infrastructure, and a variety of products so that farmers are able to access financing quickly and easily. With LANDE and its investors as partners, farmers can become more independent and sustainable, while improving their yield, efficiency and profitability. Projects offer interest rates of up to 14 per cent per annum.

https://lande.finance

T: +371 20381802

E: info@lande.finance

Lendwise is the UK’s only peer-to-peer lender that is dedicated to impact investing in education finance. Investors finance education for borrowers at universities and business schools across the UK and globally. Investors define their own risk appetite and use Lendwise’s AutoLend feature to diversify their strategy across a pool of loans, which can be invested in an IFISA wrapper earning average returns of up to nine per cent per annum.

www.lendwise.com

T: 0203 890 7270

E: lenders@lendwise.com

Lending for over eight years, Somo is a seasoned bridging lender specialising in providing short-term secured loans against UK property. Somo gives its lenders the opportunity to tailor their investments according to their risk tolerance, selecting interest rates and loan-to-value ratios that align with their preferences, with a minimum investment of £5,000.

W: www.somo.co.uk/how-it-works

T: 0161 312 5656

E: investors@somo.co.uk

SERVICE PROVIDERS AND INDUSTRY ORGANISATIONS

The European Crowdfunding Network (EuroCrowd) is an independent, professional business network promoting adequate transparency, regulation and governance in digital finance while offering a combined voice in policy discussion and public opinion building. It executes initiatives aimed at innovating, representing, promoting and protecting the European crowdfunding industry.

www.eurocrowd.org

E: info@eurocrowd.org

Q2 creates simple, smart, end-to-end lending experiences that make you an indispensable partner on your customers' financial journeys. Its modular platform gives you the ability to manage lending simply throughout the entire loan lifecycle, from application, onboarding, servicing to collections. The result is a better experience for both borrowers and lenders.

https://eu.q2.com

T: 020 3823 2300

E: info@Q2.com