CreditEase Wealth Management announces today that its Offshore Private Credit Fund ("OPCF") has invested a total of US$30 million in two transactions with OnDeck and LendingHome, after making its first investment in Avant and Prosper last year.
OPCF raised US$80 million from its Chinese clients in late 2015 which will be fully deployed by end March 2017.
"Over the last several months, we have conducted a thorough screening process where we've looked at more than 90 different lending platforms and fund managers across the world. Since the market was volatile in 2016, we have been particularly diligent in our investment program. As one of the world's leading lending platforms with US$33 billion in loans to over one million borrowers in China, we maintain rigorous due diligence processes and stringent data analysis by leveraging on CreditEase's long track record and expertise," explained Richard Williamson, Head of Offshore Business at CreditEase Wealth Management.
OPCF is the first Chinese offshore fund to invest in loans issued by western platforms. OPCF provides Chinese high net worth and mass affluent investors the opportunity to spread risks across different geographies with exposure to Western private credit. It is also a natural fit for CreditEase Wealth Management clients, given that they are already familiar with the P2P asset class having exposure to it in China.
"We are thrilled to work with another two leading marketplace lending platforms in the US. We initially invested in two consumer lending platforms. This year, we decided to invest in the SME and real estate sectors to further diversify our portfolio. We were able to structure a unique asset-backed lending transaction with OnDeck that ensures stable returns for our investors and low volatility compared to a traditional whole-loan purchase. We believe that the "fix-and-flip" loans originated by LendingHome offer attractive risk-adjusted returns and compelling diversification benefits," stated Mikael Nabati, Chief Investment Officer of OPCF.
Given the low yield environment, investors are starved for yields. As a result, there has been a significant increase in demand for private debt and alternative lending credit asset classes. Marketplace lending has emerged as a new asset class with attractive returns compared to other fixed-income products and low correlation to equities. Against a backdrop of bank deleveraging and de-risking, the global marketplace lending market is expected grow to US$150-490 billion by 2020, according to a recent report published by Morgan Stanley.
"Although the rate hike announced by the U.S. Federal Reserve recently was only the third increase since the global financial crisis in 2008, the pace seems to have picked up and three more hikes are expected in 2017. We continue to see strong demand for shorter duration marketplace lending products given the limited sensitivity to interest rate movements make the returns of these products more stable and reliable," Nabati added. "Now that our first fund is close to be fully deployed, we are planning for our second fund with a fundraising target of US$200 million. OPCF II will focus on the same asset class but with a different and innovative fund structure to meet with our clients' needs for products with different durations. While OPCF has exclusively invested in U.S. platforms to date, we are actively looking at new geographies, such as Australia and Europe, as well as new credit products, such as student loans, invoice factoring and agricultural loans."
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