Peer-to-peer platforms have reassured investors that the huge drop in the FTSE 100 this morning (9 March) will not affect them.
The FTSE 100 dropped by a massive 8.4 per cent this morning, the fourth biggest decline in its history.
This was reportedly due to a huge fall in the price of oil, and fears about coronavirus affecting investors.
However, P2P lenders have been quick to reassure investors that they will not be affected by the current stock market crisis.
“Fixed-return property lending has, by definition, got no volatility embedded in it,” said Yann Murrciano, chief executive at Blend Network.
“Investors are lending their money at a fixed return for a fixed amount of time. The risk, of course, depends on the platform’s strategy and due diligence process.”
Murciano said that the property-backed P2P platform has been speaking to investors who are already liquidating their equity positions and are looking for alternatives.
“We have been contacted by investors who are looking to invest in fixed-return property lending,” he said.
“The realisation that global GDP will most probably shrink for part of this year, and the looming risk of a financial panic and credit-crunch means everyone is looking for yield and there is a massive flight to safer, fixed-return assets.”
David Genn, chief executive of Goji, said that market sentiment with stocks and shares doesn’t affect the P2P market.
“The fact that the FTSE responded with such a large drop demonstrates why P2P is such a healthy option to have in investors’ portfolios because it reacts to loans and not market sentiment.
“As long as borrowers still repay their loans, then investors will continue to see strong interest on their P2P investments which is why P2P is such a strong asset class because it doesn’t react to big swings in market sentiment.
“I think whatever the reason for change in the stock market, P2P at the end of the day is an asset class driven just by the fundamentals.
“It comes down to the credit underwriting and ability of origination and ability to collect repayments.”
Ratesetter added that P2P lending can offer lower-risk returns.
“The P2P industry is opening access to stable and low-risk returns,” a RateSetter spokesperson said.
“RateSetter’s returns are consistent, stable and low-risk thanks to our provision fund model which diversifies every investor’s exposure across the entire loan portfolio.
“The performance of our portfolio plays out over the lifetime of the loans, which is a period of years, so we have time to respond to emerging performance trends and make adjustments.
“In contrast, the performance of shares moves rapidly, and this leads to volatility.”
Carl Davies, chief operating officer of The House Crowd, said that the stock market volatility changes very little apart from affecting confidence in investing per se.
“In an ideal world it should mean investors look at property backed loans more seriously as they are secured on assets that have a real value and don’t fluctuate in value so rapidly based on perceptions and sentiment,” he said.
“Granted the assets are not as liquid as stocks and shares but neither are they as volatile.
“It is another example of the industry needing to educate investors on how we can help preserve their wealth as well as offer strong targeted returns.”