Private investors are quietly deploying money in the specialist lending market

Columnists | Financial Services | Funding | Property & Construction
Yann Murciano

Yann Murciano is CEO at London-based property lending company Blend Network. Blend Network provides development finance and bridging loans of up to £3 million to property developers all across the UK regions. Here, he talks to Business Leader about the specialist lending market.

A number of specialist finance providers stopped lending during the Covid-19 crisis after several institutional lenders backing them withdrew their funding lines. But on the other hand, wealthy investors with cash on hand have piled into the private lending market.

Yann Murciano, CEO at development finance and bridging lender Blend Network that is backed by a number of those investors, argues that P2P property lending platforms are in an ideal position to serve as a loan origination vehicle.

A recent article described how ultra-rich families with cash on hand had started to pile into private debt to avoid the stock market volatility.

As a company that is backed by a number of those high-profile investors such as the former Vice Chairman of Barclays, the current Chairman of OakNorth Bank, the Chairman of Publicis and the co-founder of Brevan Howard, one of the world’s largest hedge funds which at its peak had $40bn in assets under management, we at Blend Network have witnessed a similar trend with an increased appetite for private property development finance from our family office and high net worth investors.

Family offices and high net worth investors are piling into private debt because they have nowhere else to put their cash. Yields on government bonds are barely positive in the US; they are negative in Japan and much of Europe.

Effectively, investors are sure to lose money by holding bonds till maturity. If inflation rises, as many expect to, losses would be even larger.

But how about equity markets?

Investors we speak too are nervous that equity markets may see a correction following their recent rise. Between 19 February and 23 March, the S&P 500 index lost a third of its value. With barely a pause, it has since rocketed, recovering more than half its loss.

While the catalyst was news that the Federal Reserve (Fed) would buy corporate bonds helping firms finance their debt, investors are undoubtedly worried that financial markets have got out of whack with the real economy and that something has to give.

Furthermore, even the recent rise in equity markets has been uneven and seen a geographical dislocation. UK and continental Europe stock markets, more reliant on industries like car making, banking and energy, have lagged behind while US markets have rallied mainly due to the outperformance of the tech sector, which now make up a fifth of the S&P 500 index.

It is no surprise then that family offices and high net worth investors are looking to fund developments through the private debt market. According to Preqin, the number of family offices active in private debt has more than doubled since 2015.

But while some family offices have highly sophisticated investing operations and are able to originate property deals in-house, most rely on external origination and in-depth due diligence by professional teams.

Against this backdrop, P2P property lending platforms have emerged as the vehicle of choice by those investors to deploy funding and to source deals. P2P property lending platforms are in an ideal position to serve as an origination vehicle for those wealthy investors. Of course, that is also advantageous for all those retail investors using P2P lending to deploy cash since they are effectively co-investing with highly sophisticated investors on the same deal.

Borrowers, of course, like turning to family offices and high net worth private investors due to the extra flexibility, faster access to cash compared with most traditional lenders. For example, we at Blend Network have had our strongest months in June and July and have lent record volumes to borrowers.

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