Advisers urged to be cautious on ‘esoteric’ P2P investments

Peer-to-peer (P2P) lending company Goji is launching the UK’s first diversified P2P lending bonds.

The Goji Diversified P2P Lending Bond is a fixed-term product that spreads risk by investing across a range of P2P lending platforms. It is eligible for inclusion in an Innovative Finance ISA. The one-year fixed-term bond has already launched, while the three-year bond is set to launch in April or May, with the five-year bond following soon after.

‘These bonds will aim for steady cashflows, low volatility and low correlation with equities,’ said Jake Wombwell-Povey, Goji chief executive.

‘This is like a fund of funds model. We know which P2P loan groups and managers we like and provide them with capital. It’s old school. It’s about asset allocation, diversification, risk management and counterparty management.’

Safety net

According to Wombwell-Povey, Goji tries to pick P2P platforms that manage risk well. ‘This means avoiding some of the big P2P platforms, which give simplified products to retail investors,’ he said.

Wombwell-Povey described how Goji manages risk by lending across different sectors. The types of platform it might invest in include property, vehicles, fixed assets, invoice finance, and lending to small and medium-sized companies.

He said the current fund contains around 600 companies, ‘so there’s loan diversification’. Goji targets a 5% annual yield, and said the current yield after fees (after three months for the one-year bond) is 6.8%.

‘We’re seeing a bifurcation from advisers,’ added Wombwell-Povey. ‘Those that don’t look at alternative investments won’t consider the bond. But those that use venture capital trusts [VCTs] and enterprise investment schemes [EISs] like it.’

Step into the unknown

Phil Young, managing director of support services provider Threesixty, has concerns. ‘Advisers should steer clear of these products,’ he said. ‘It has an impact on PI [professional indemnity]…

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