Gavin Solsky
Australia’s first pooled investment vehicle targeting high income returns from prime credit sourced via global Marketplace Lending (MPL) has opened to high net worth and institutional investors.
Global Credit Investments’ (GCI) Diversified Income Fund (the Fund) invests in prime short-term consumer and small business credit.
GCI co-founder and Chairman Steven Sher said the Fund was conceived after searching for alternative investable assets that are highly diversified, deliver stable income, are uncorrelated to major asset classes and would remain resilient during periods of market stress.
“Consumer and small business credit has historically been the exclusive domain of banks and financial institutions.
“However, emerging technologies are disrupting traditional banking markets, allowing GCI to now access what we believe is among the best risk/return credit opportunities available to fixed income investors,” Mr Sher said.
A May 2015 Morgan Stanley research paper “Global Marketplace Lending: Disruptive Innovation in Financials” estimated that credit issuance via global Marketplace Lending would reach between US$290 Billion to upwards of US$490 Billion by the year 2020.
The Australian market for addressable consumer and SME lenders would also grow to an estimated AUD$19 Billion by 2020, the Morgan Stanley paper said.
“The speed and magnitude of disintermediation allows us to now ‘cherry-pick’ prime assets from online marketplace originators. These assets used to sit directly on a bank’s balance sheet and were previously inaccessible to non- bank investors. Investors in the GCI fund can now access a high return by buying these assets without the additional risk of leverage,” Mr Sher said.
GCI co-founder and Executive Director Gavin Solsky said GCI has made significant investments in quality people, processes and technology in order to research and access prime quality credit from the Australian and global marketplace, in particular the USA.
The firm has developed sophisticated proprietary technology and secured access, initially, to leading US-based Marketplace platforms, Lending Club and Prosper, which together account for over 60 per cent market share (source: Morgan Stanley) of the US Marketplace Lending sector. This gives the GCI Fund the additional benefit of allowing investors to diversify into US dollars, while still attaining a strong yield.
“We have brought together a globally credentialed team, with a complementary mix of investment and management skills. The team has its own capital invested alongside our investors.
“This is a very exciting time as financial technology and new lending models combine to address a massive global market.
“The trend translates into simple, attractive investment outcomes for ourselves and our investors: having our own capital invested in highly distributed, unleveraged, short-term credit with monthly principal and interest payback terms makes a lot of sense,” Mr Solsky said.
“Regular payback terms effectively ‘de-risk’ our credit exposure to any single loan, unlike traditional longer term fixed income assets (bonds) which are not only exposed to interest rate risk, but investors only receive a bullet payment at the end of the investment term,” he said.
The GCI Diversified Income Fund is open to sophisticated (high net worth) and institutional investors and targets a high single digit pre-tax return to investors after fees, denominated in US dollars.
