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Market Focus Report - SF - The Future of Peer-To-Peer (P2P) Lending ARC
Market Focus Report - SF - The Future of Peer-To-Peer (P2P) Lending ARC
Market Focus Report - SF - The Future of Peer-To-Peer (P2P) Lending ARC
JULY 1, 2015
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4) Whilst it is arguably too early to draw empirical conclusions on the correlation of P2P investment returns with those
of traditional asset classes, many consider the efficacy of P2P investments as portfolio diversifiers to be potentially
significant.
5) Much to the disappointment of P2P lenders, the Chancellors 2015 Budget failed to bring P2P investments onto the
list of those permissible within the ISA framework. Nonetheless, it remains a conceivable change, and P2P platforms
and lenders remain optimistic.
Whilst independently, these factors might cause one to raise an eyebrow, collectively they support the notion that P2P
lending could soon see itself positioned alongside traditional asset classes.
DECISION TIME
Investors are inherently skeptical about new asset classes. Since most P2P loans are not protected by any government
guarantee, the involvement of the P2P company facilitating the loan presents another dimension of capital risk.
Consequently, investors must not only choose each investment with great care, but also the P2P platform itself and
make no mistake, competition is already extremely fierce. In light of the above, a Servicer Quality rating issued by ARC
Ratings can address a principal consideration for investors.
The benefits of an ARC Ratings Servicer Quality (SQ) rating are twofold:
1) For investors, an SQ rating offers a convenient and reliable means by which to compare and evaluate P2P platforms.
Investors can take comfort from the knowledge that a servicer has received a comprehensive specialist assessment,
and thus make more suitably informed decisions.
2) Experience teaches us that those entities surfacing as the early favourites, often win the race. For P2P platforms, an
SQ rating is a powerful tool for attracting and instilling confidence in potential investors. Furthermore, an SQ rating
highlights sources of internal efficiency and competitive advantage, and can therefore also support optimal
decision-making for P2P businesses, as well as being a useful first step input towards structuring a securitisation.
On 23rd June 2015, ARC Ratings published its first Servicer Quality Rating for LendInvest Limited. The full report can be
found at: www.arcratings.com.
www.arcratings.com For more information on obtaining an ARC Ratings Servicer Quality rating, contact
details can be found below.
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investor uptake could all impede the future of P2P loans as a prospective major asset class. Rising interest rates, leading
to a subsequent escalation in the return available on risk-free assets (i.e. government securities) could also weaken the
relative attractiveness of P2P investments.
Overall, ARC Ratings believes P2P lending will continue to gain increasing traction throughout 2015 and 2016,
ultimately emerging as a strong and prominent alternative asset class.
ARC Ratings has significant experience in according ratings to a broad range of securitisations. In rating securitised P2P
assets, ARC may apply a hybrid of RMBS and Consumer ABS methodology, or a bespoke methodology depending on
the characteristics of the underlying collateral. ARC is also considering developing full rating methodologies for a range
of specific P2P subsectors, including student loans and secured business loans. For more information on obtaining an
ARC Ratings P2P securitisation or Servicer Quality rating, please contact us using the details shown overleaf.
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E-mail:
arcratings@arcratings.com
Site:
www.arcratings.com
Analytical
Analytical Contacts
Contacts:
Edward Beecroft
Structured Finance Analyst
Phone: +44 (0) 7804 770717
E-mail: edward.beecroft@arcratings.com
EmmaEmma-Jane Fulcher
Head of Structured Finance
Phone: +44 (0) 7889 263197
E-mail:
mail: emma.fulcher@arcratings.com
ARC Ratings, S.A. is registered as a Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA), within the
scope of the REGULATION (EC) N 1060/2009 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL, of 16 September, and
recognised as External Credit Assessment Institution (ECAI) for Corporates by the Bank of Portugal.
Ratings assigned by ARC Ratings represent opinions on the capacity and willingness of an entity to honour, in due time and in full, the
financial commitments (principal and interest) subject to rating.
Prior to the assignment or revision of a rating ARC Ratings provides to the entity whose financial commitments are subject to rating the
documents that substantiate the rating to be attributed (the preliminary rating report). This entity is thus given the opportunity to clarify
or correct factual details, thus allowing the rating assigned to be as accurate as possible. The comments made by the entity whose
financial commitments are subject to rating are taken into account by ARC Ratings in the assignment of the rating.
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confirmed, namely by consulting the listing of public ratings available at the web site www.arcratings.com.
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