Stuart Law, chief executive of Assetz Capital, explains that an economic boom is coming and where you put your money will matter
An economic boom is coming, but investors may have to look beyond the banks if they want to benefit from it, says Stuart Law, chief executive of Assetz Capital.
Over the past year, an immense amount of money has been injected into the global economy, and particularly into the UK. According to several analyses, many households have been able to save money during the pandemic, and by the summer there could be as much as £250bn of personal savings in cash in bank accounts.
But keeping this money in cash savings may not be a fruitful option.
“Inflation is likely to be on the up as soon as this year,” predicts Law. “But for various reasons, we do not believe base rates are going to budge very much at all. I would be surprised if we have base rates at two per cent in three years’ time even with sustained inflation well above target.”
Rising inflation and low bank rates means that savers and investors will struggle to get a positive return on money which is being held in bank accounts, even while living through an economic boom. So where do these people go in their hunt for yield to counter the negative effects of inflation?
“We are reaching quite a crescendo over the next two or three years where there will be an even stronger hunt for yield, because inflation can be very dangerous,” Law says. “So I think we’re going to see a very strong push towards investments and away from savings.
“According to recent Aegon research, a huge 42 per cent of consumers would move out of bank savings accounts and into investments if faced with negative interest rates, to find a way of earning more money.”
As a result, Law expects to see a pronounced shift from savings to investments in the coming months and years, and peer-to-peer lending is perfectly positioned to take advantage of this trend.
“P2P has now been through a cycle,” he says. “People want to see that. They want to know what it does to your defaults, to your losses and to your interest rates. And whilst investors have had a bit of a reduction in interest rates, that can also help more money to flow into the provision fund which may help to avoid losses.”
What’s more, by investing in Assetz Capital, investors can play a key role in the rebirth of the UK economy and society, by supporting British businesses, housebuilders and also much needed care and supported living facilities.
“We’re not a bank, and we’re not becoming a bank,” says Law.
“We are able to support small-and medium-sized enterprises (SMEs) with a more flexible product than a bank might be able to offer, with a more personal approach and with real people on the ground. Our market is really dealing with the SMEs who have some security available and who just need to get some help in structuring the right loans.
“People are going to be attracted to this as a proven asset class with the leading platforms,” Law adds.
“We had a recession, and we’ve had some winners and losers. And I think the winners in any industry will benefit tremendously from the next cycle.
“We would expect P2P lending to be a good home for people looking to put a bit of money into an investment producing a healthy interest rate.”