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PROFILE
Opportunities in private credit
HCG Funds founder Hadi Habal speaks to Marc Shoffman about the alternative investment manager’s allocation strategy
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NSTITUTIONAL INTEREST in fintech lenders – including peer-to-peer lending platforms – is on the rise. One player in this growing market is HCG Funds, an alternative investment manager that specialises in backing private credit originated through fintech platforms. It was set up in 2010 by Hadi Habal and Jose Penabad, who used to work together at investment bank JP Morgan. The fund doesn’t publicly comment on the platforms it invests through but is reported to have backed loans through LendingClub and Climb Credit in the US. Habal explains the fund’s approach to Peer2Peer Finance News, when they may be ready to invest in UK platforms and his number one rule. Marc Shoffman: Which regional markets are you focused on? Hadi Habal: Everything we have done so far has been in the US. The risk-adjusted returns continue to be superior in US dollar terms compared with everywhere else. The only other market that made sense was the UK but we hit the pause button after the Brexit vote. There was too much currency risk as we are dollar denominated. We decided not to proceed until there was more clarity and four years later we still haven’t made any investments. We need to be comfortable with the volatility in the UK first before investing. Other than the US, the UK is the
only other market that provides depth, a common scoring standard for consumer credit, a legal framework and societal respect for contract law. Both legal systems are rooted in the same legal code. The UK has a distinct advantage in business lending which is why Funding Circle came out of the UK and not the US. We don’t have a Companies House equivalent. Small business lending in the US didn’t take off in a comprehensive manner until you had payment
system companies provide their own solution, outside of that there is no common data. MS: Are there not opportunities in Europe? HH: Europe sounds interesting but when you look at implementation, the attractiveness comes down. First there are the risk-adjusted returns, which are meagre. We are in a world where returns are low, but they are depressed even further in Europe as the
