BONDMASON’S chief executive has said that peer-to-peer lending “has a viable future” with “some good operators” in the market, despite the firm winding down its own P2P offering.
The direct lending investment manager allocates investors’ funds to a variety of property-backed loans and P2P loans, with target returns of six per cent.
It told customers this week that it is winding down its flagship product, BondMason Core, as it forecasts returns to fall to the three to four per cent range in the coming years.
“The rates we’re seeing and the availability of loans we like are decreasing, which I think is because there is more institutional capital coming into the sector,” chief executive Stephen Findlay (pictured) told Peer2Peer Finance News.
“Therefore the headline rate is decreasing over time.
“Secondly, operational costs – such as regulation, compliance and client acquisition – are rising, resulting in higher costs for clients.
“We expect net returns to fall to three to four per cent per year, and we don’t think this is high enough for the risks involved.”
BondMason is pivoting its focus towards a new buy-to-let investment portfolio, which is ISA- and SIPP- eligible.
Read more: BondMason set to unveil range of bonds
BondMason BRIX is a market-capitalisation weighted index of listed companies and funds that
own UK residential property for letting.
Despite BondMason’s change in focus, Findlay said he felt confident about the future of the P2P sector.
“If it’s done appropriately, the model has a viable future,” he said.
“The challenge is finding those that are doing it in an appropriate way.
“The difficulty is that it’s an emerging asset class with lots of different business models which can be difficult for investors to understand.
“There are some good operators out there doing good things.”
The sector has had some reputational damage recently due to the collapse of P2P property platform Lendy, after months of speculation about mounting arrears.
Findlay noted that this was a platform-specific issue.
“Lendy’s collapse was a function of how they operate rather than the nature of the construct,” he said.
“Time will hopefully ensure the sector will consolidate leaving the good players.”