Lendy defends secondary market amid liquidity concerns
PEER-TO-PEER property platform Lendy has issued a note reminding investors that there are no guarantees that they will be able to sell part of their loans, amid concerns about liquidity in the firm’s secondary market.
Investors have taken to the P2P Independent Forum website to discuss problems with selling their loans on the Lendy platform and a note issued by the lender today admits the secondary market has slowed but points out that this is a risk of P2P lending.
“Since the platform launched in 2012 the average time taken to sell a loan part has been around 24 hours,” the update said.
“However, there have been periods when it has taken longer, for example when a large number of loan parts are put up for sale by investors at a similar time.
“While the Lendy platform still has a very efficient secondary market, over recent weeks it has slowed quite a lot as a large number of new loans have gone live.”
The platform said the situation has been exacerbated by the general economic uncertainties of Brexit and the “less than stable position of the government.”
It said it expected the average time to sell a loan part to return to more normal levels in time.
The platform said the market operates on a supply and demand basis so there is never a guarantee of a sale, but insists that a lack of liquidity is not unusual.
“The property market is by its nature unpredictable, with both busier and quieter periods, as anyone who has bought a house to live in, to rent, or to develop would testify,” it said.
“This is not unusual and normally part of a natural cycle. Indeed, it happens in most other investment classes, with liquidity of corporate and government bonds a good example, where an over-supply of one – most typically government bonds and the more liquid and easier to buy and sell – can reduce demand for bonds issued by a company, which are typically less liquid, so investors have more difficulties in buying and selling them.
“There are of course many benefits to investing direct or indirect in property, but it’s important to remember that there can be an issue of liquidity, which can mean it can take longer to sell. If you sought the advice of a financial adviser they would typically encourage you to be aware of the idiosyncratic liquidity features associated with property and aim to invest for the longer or whole term as part of a diversified portfolio.”
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