Risk & Reward – The rise of digital lending

Article | 22 December 2017 | Invesco

 

Inside the latest issue of Risk & Reward magazine we look at how digital lenders are disrupting the status quo and give a global perspective on crowdfunding, and share insights and research covering a range of themes.

One of the most interesting developments accompanying the advent of financial technology has been the rapid growth of digital lending and other alternative finance platforms. This edition of Risk & Reward explores these developments and their implications for markets and investors.

The rise of digital lending

Digital lending platforms have grown enormously in recent years, with far-reaching consequences for traditional banks. We look at the digital lending phenomenon and discuss different business models, such as: balance sheet lending, marketplace lending, and a hybrid of the two. We also review how digital lenders can distinguish themselves from competitors, give an overview of regulatory issues and speculate how the sector may evolve in years to come.

Inside the Circle: Samir Desai on online lending

Funding Circle recently became the UK’s biggest online lending platform. Specialising in loans to small businesses, it currently operates in the UK, US, Germany, and the Netherlands. Its institutional investors include Invesco and Dutch insurer Aegon. We spoke with co-founder and CEO Samir Desai about the changing lending landscape.

A global perspective: Professor Raghavendra Rau on crowdfunding and digital lending

Raghavendra Rau is the Sir Evelyn de Rothschild Professor of Finance at Cambridge Judge Business School. His latest research paper offers the first detailed analysis of the economic determinants of digital lending and similar activities worldwide.

Is it a factor and – if so – how many?

Are more factors always better? As with many questions, the answer is: it depends. We analyse whether 19 factors from the Invesco Quantitative Strategies model should, as before, be grouped into the traditional four families: Price Trend, Earnings Expectations, Quality, and Value.

Benford’s law and financial analysis

Are all numbers equally likely? Not if you look at the leading digits of figures from numerous empirical data sets. In this paper, we identify some interesting implications and examine how financial analysts can make use of Benford’s law.

Securitised assets: what you didn’t know you’ve been missing out

Ten years after the peak of the global financial crisis, many investors are still wary of securitised assets. But a lot has changed since then. We believe the time has come to rediscover an asset class that may offer multiple advantages, in terms of both diversification and risk-adjusted returns. We compare US Agency MBS with US Treasuries and US investment-grade corporates over 10 and 15 year periods.

“Generation Income” – looking beyond traditional real estate

For real estate investors, it may be time to look beyond the well-known. We describe three alternative real estate asset classes that may cater to investors’ income needs: European hotels, US real estate and global income securities (aka listed real estate).

Read the latest issue of Risk & Reward magazine

Important information

The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.

Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice.

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