The numbers don’t lie
Crowd2Fund has exceeded its own target rates while offering more choice to investors. Chief executive Chris Hancock reveals how they did it…
MOST PEER-TO-PEER lenders are satisfied with offering investors inflation-beating returns of between three and six per cent. Not Crowd2Fund. On its website, the platform says that it targets average returns of between six and 15 per cent before fees and bad debt, placing it among the highest-paying P2P lenders in the UK.
In fact, according to its latest fund statistics, Crowd2Fund delivered an average annual return of 10.33 per cent APR at the end of March 2019, before fees and bad debts. It has done this by giving investors more choice, offering a range of different loans and investment types on its platform.
The fund statistics also showed that since its launch in 2014, Crowd2Fund has received £29.44m in investments through its platform, with £2.29m paid out in interest. According to Chris Hancock, chief executive of Crowd2Fund, the vast majority of these funds have been invested within the platform’s Innovative Finance ISA (IFISA) wrapper.
“What’s important about these statistics is that this is a new financial product and it’s important that people recognise that it’s different to a savings account,” he says. “The IFISA is more like a stocks and shares ISA in that it fluctuates depending on your investment choices. But the firm statistics that we have provided show the overall average performance of the fund, which is actually very good.”
Indeed, Crowd2Fund has calculated that even in a worst case scenario, 92.23 per cent of the platform’s investors will have made money through their portfolio once all non-default loans have been repaid. In reality though, Crowd2Fund aims to recover 60 per cent of defaults, so the number of investors who will avoid losing money should be much higher.
Any lending business would be thrilled with these sorts of figures, but for Hancock it is simply “an ongoing improvement”.
“The more loans we issue, the more we can learn,” he says. “We only plan to improve on the existing diligent credit investment process.
“But what’s really reassuring from my perspective as a founder is that I think we’ve got a genuine, honest and transparent track record now where investors can have more confidence in the returns that they can expect.”
Crowd2Fund takes a unique approach to its credit assessment process, combining an in-house assessment by its credit team with a highly specialised AI programme.
“It’s about a revolutionary approach to credit assessment,” says Hancock. “And very thorough due diligence, but also the transparency that comes with the fact that every loan goes out to our community of 7,500 investors, all of whom scrutinise every deal and every loan as well. That’s a revolutionary approach to lending.”
Hancock adds that it is “really important” for investors to conduct their own due diligence, and the platform provides a wealth of investment information to help its investors make the most balanced decision that they can.
To date, Crowd2Fund has issued 360 loans, each one of which has been subject to this rigorous three-part due diligence process. As the platform continues to grow, its high returns and stringent credit checks will help to win over a new generation of P2P and IFISA investors.