Writers are by nature curious, and one writer’s expertise in teaching the world about peer-to-peer lending has motivated him to get into the business himself. Peter Renton, the most prominent blogger covering peer-to-peer lending, created Lend Academy 4 years ago to cover Lending Club, Prosper and others in the alternative lending arena. Now he is trying his hand at investing, opening a fund available to anyone.
According to a recent Bloomberg story, he is “raising about $28 million this year for Lend Academy Investments LLC. He’s seeking funds for the New York-based firm with co-founders Jason Jones, a former hedge-fund manager, and Bo Brustkern, a valuation expert.”
Lend Academy has approximately 20,000 visitors a month. Their news and advice on peer-to-peer lending provides useful information on P2P lending practices and the companies who provide these alternative loans. Importantly, it is also a service that connects borrowers and investors online. Renton and Jones also started last June the LendIt conference where 300 investors “thirsting for annual returns that have exceeded 9 percent” demonstrated the market potential of P2P lending.
What started out as peer-to-peer education has evolved into an investing platform of their own. “About two years ago, I started getting e-mails from people saying I’d love for you to manage my money,” said Renton, who has been investing his own funds in the asset class since 2009. “They were saying, ‘I love the idea of peer-to-peer lending, but don’t want to do it myself.’”
According to Bloomberg, Lend Academy will offer a fund of diversified loans from LendingClub, Prosper and business lender Funding Circle Ltd., with plans to add more providers. They seek to raise $100 million by the end of 2015.
Past blog posts from Cumulus Funding define the success and processes used by LendingClub and Prosper. These loans of $35,000 or less are generally paid back over three or five years and are used to finance debt consolidation, home improvements, college education, or short term cash flow.
Cumulus Funding was founded by former investment banker Nathan Popkins and provides it’s own twist on alternative lending products. Popkins explains, “Cumulus Funding doesn’t make loans. We don’t charge interest. We provide funding now in exchange for a percentage of your future earnings. We walk hand-in-hand with you financially. You are our investment–not a debt holder– and your success determines our success.”
“It’s not hard to see how a guy writing about Peer-to-Peer lending would think about getting into the game,” Popkins said. In fact, the maturity of this alternative market has attracted many outsiders. “The track record, technology and service providers necessary to attract institutional investors are now in place–and platforms like Lending Club, Prosper and Funding Circle are being flooded with institutional money.”
Bloomberg reports, “While the lenders initially attracted retail investors, the returns have lured big institutions and hedge funds. LendingClub projects returns of 5.4 percent to 9.4 percent.” When borrowers are accepted, the loans get listed on the company websites for individuals and institutions to back.
U.S. peer-to-peer lenders in the U.S. alone are projected to be originating $20 billion in loans. LendingClub’s originations in the third quarter increased to $567.1 million, more than double from the year earlier. Prosper’s loans increased over 100 percent to $94.8 million in the period.
Lend Academy will offer a variety of ways for investors to participate in their product. First, they are creating a fund available to anyone. They are also working with Prosper Prosper to allow investors to buy a cross-section of loans on their platform. Their product mix projects a conservative option with returns of 5 percent, a balanced offering with 7.5 percent returns, and a riskier option hoping to return 10 percent. “Lend Academy will charge fees of 0.95 percent to 1.5 percent and won’t keep any of the gains, returning them all to investors”, Bloomberg reports.
When asked if he saw a conflict between educational content and commerce on the same site, Renton was forthright. “I’m a cheerleader for this space,” Renton said. “I want to remain a source of news and education, but I don’t pretend to be a journalist.”