Interactive Investor

Marshall Wace to float P2P fund

19th May 2014 15:55

Ceri Jones from interactive investor

Hedge fund manager Marshall Wace plans to float its peer-to-peer lending (P2P) fund with a target of £200 million, in a move to take advantage of the difficulties in traditional bank finance.

The announcement follows the group's acquisition last month of P2P specialist Eaglewood Capital Management, a New York firm controlling about $213 million (£126.5 million) which vets and posts loan requests by individuals that are then funded collectively.

Eaglewood has been among the first to start securitising these loans, and recently completed a $47 million increase to a $53 million securitisation.

The investment trust will invest both in Eaglewood's Income Fund and in loans through a variety of P2P platforms, diversifying across asset class types and the equity of various growth companies.

"Peer-to-peer lending has the potential to transform consumer and small and medium enterprise lending practices worldwide by disintermediating the banks," Marshall Wace co-founder Ian Wace said at the time of the acquisition.

Banks are now required to hold higher levels of capital following tighter regulation in the wake of the financial crisis, which has cut their margins at the smaller end of the business loans market.

P2P lending platforms connect borrowers with lenders online, providing cheaper finance than banks and at lower risk as the loans are not taken onto their balance sheets.

The Marshall Wace fund will invest in loans that yield between 5-15% a year, and itself have a target yield of at least 6-8% through a quarterly dividend. It will distribute 85% or more of distributable income, while retaining the option of investing up to 5% of its net asset value in P2P lending platforms.

Marshall Wace, which manages $18 billion of assets, has been an early mover in this arena.

Many P2P ventures are expected to be listed as they become a more widely used alternative to bank finance.

For example, Lending Club, the $3.75 billion US P2P platform, is currently preparing for an IPO.

UK research group NESTA estimates that £12.3 billion plus was lent through P2P last year.