The 1 st Specialised Peer-to-Peer Lending Fund launched and regulated in the EU

Transcription

1 The 1 st Specialised Peer-to-Peer Lending Fund launched and regulated in the EU REGULATED BY COMMISSION DE SURVEILLANCE DU SECTEUR FINANCIER, CSSF, LUXEMBOURG

2 CONTENTS 3 Synthesis P2P Lending Fund Summary 4 Benefits of P2P Lending 5-9 P2P Consumer Credit Opportunity P2P Small Business Loans P2P Invoice Discounting The Synthesis Team Research 24 Investment Terms & Service Providers REGULATED BY COMMISSION DE SURVEILLANCE DU SECTEUR FINANCIER, CSSF, LUXEMBOURG 2

3 Synthesis P2P Lending Fund Synthesis P2P Lending Fund invests in consumer loans, small business loans, invoice financing and other credit instruments via leading online lending platforms. Synthesis P2P Lending Fund offers access to an emerging asset class not otherwise available to investors. PROVEN TRACK RECORD Comparative Cumulative Returns 112,37 110,88 101,89 Synthesis P2P Lending Fund was launched in November 2012, and was the 1 st Fund of its type to be established in the EU. Feb 2014 iboxx USD Overall Index HFRI Index The Fund aims to achieve risk adjusted returns that are superior to other fixed income strategies by investing in loans with high credit quality and short duration, thereby displaying reduced volatility and low correlation to other asset classes. The Fund has achieved an average monthly return of 0.69% since launch, and, after its initial deployment of capital, has produced positive returns for its investors every month since January Annualised Return Risk vs. Return Annualised Volatility iboxx USD Overall Index HFRI Index REGULATED BY COMMISSION DE SURVEILLANCE DU SECTEUR FINANCIER, CSSF, LUXEMBOURG 3

4 Synthesis P2P Lending Fund THE P2P LENDING INDUSTRY IS CHANGING THE FACE OF LENDING BENEFITS OF P2P LENDING TRADITIONAL LENDER Operating Expenses: 5-7% Branch Infrastructure Rent Personnel Payroll Utilities Reserve Requirements Customer Acquisition/Marketing Underwriting Origination Servicing ONLINE LENDING PLATFORM Operating Expenses: <2.0% Technology replaces Branches Customer Acquisition/Marketing Underwriting Origination Servicing Investor Benefits Total control of borrower quality in loan selection process Technology provides fast access to assets Highly diversified portfolio of borrowers Short duration mitigates interest rate risks Low correlation to other asset classes Low Volatility Borrower Benefits Reduced interest rates relative to other financing alternatives (i.e. credit cards) No hidden fees Borrower is aware of fixed monthly payment as soon as the loan request is funded Easy application process saves the borrower time Typically quick acceptance or rejection (depending on borrower quality) REGULATED BY COMMISSION DE SURVEILLANCE DU SECTEUR FINANCIER, CSSF, LUXEMBOURG 4

5 The Consumer Credit Opportunity: A favorable time to invest CONSUMER CREDIT PERFORMANCE IS STRONG Stabilizing GDP Growth has led to 1 Real GDP % Change job recovery which has 2 Monthly Non-Farm Payrolls allowed consumers to build healthy balance sheets 3 leading to decreased credit card losses 4 Debt to Income Since 1980 Credit Card Charge-Offs Since Source: Bureau of Economic Analysis as of Q Source: Bureau of Labor Statistics as of Source: Federal reserve as of Q Federal reserve as REGULATED BY COMMISSION DE SURVEILLANCE DU SECTEUR FINANCIER, CSSF, LUXEMBOURG 5

6 The Consumer Credit Opportunity: A favorable time to invest Post financial crisis credit card delinquencies declining Post the financial crisis we see there has been a marked improvement in consumer finance credit quality Credit card delinquency trends relevant for US P2P lending as debt consolidation is a main use of the funds Lending Club: 83% of loans used to consolidate debt Prosper: 52% of loans used to consolidate debt Capital One 30 day Credit Card delinquency US Credit Card delinquency 90 days + Federal Reserve US Delinquency Rates for All Banks Credit Cards UK Credit Card delinquency 90 days + REGULATED BY COMMISSION DE SURVEILLANCE DU SECTEUR FINANCIER, CSSF, LUXEMBOURG 6

7 The Consumer Credit Opportunity: P2P scalability The United States currently has ~$850 billion of credit card debt outstanding via 600 million issued credit cards ($mm) Lending Club Origination since 2007 Lending Club has originated over $4 billion since its 2007 inception, representing just a fraction of the consumer credit opportunity Source: Lending Club REGULATED BY COMMISSION DE SURVEILLANCE DU SECTEUR FINANCIER, CSSF, LUXEMBOURG 7

8 The Consumer Credit Opportunity: within the P2P space SYNTHESIS BELIEVES LENDING CLUB LOANS OFFER COMPELLING RISK-ADJUSTED RETURN PROSPECTS Source: Lending Club REGULATED BY COMMISSION DE SURVEILLANCE DU SECTEUR FINANCIER, CSSF, LUXEMBOURG 8

9 Loan Selection & Valuation Model 1 The proprietary software application developed by our specialized partner interfaces directly with Lending Club s API (Application Programming Interface), in real time. 2 A sophisticated selection model is applied to the universe of loans to construct the portfolio on a loan-by-loan basis. 3 The model is built around several variables designed to anticipate and reduce losses (charge-offs). REGULATED BY COMMISSION DE SURVEILLANCE DU SECTEUR FINANCIER, CSSF, LUXEMBOURG 9

10 Small Business Loans SMALL BUSINESSES ARE UNDERSERVED BY TRADITIONAL FINANCIAL INSTITUTIONS Massive bank consolidation has led to limited access to credit for small businesses: 33,193 U.S. banks in 1984 vs. 14,413 in % of Small Business owners that apply for loans are turned down 2 Small Business Loans as Percentage of All Business Loans in the U.S Source: 2. Source: Pepperdine study. 3. Source: FDIC REGULATED BY COMMISSION DE SURVEILLANCE DU SECTEUR FINANCIER, CSSF, LUXEMBOURG 10

11 Small Business Loans: Illustrative Borrower Profile Traditional lenders invest in larger, more liquid loans, making financing for small businesses difficult and often impossible AVERAGE LOAN SIZE AVERAGE YIELD High-Yield Issuance 1 $503 million 6% Middle-Market Loans 2 $13 million 12% CREATING AN OPPORTUNITY TO INVEST IN SMALL LOANS TO ACHIEVE HIGHER YIELDS Our Target Small Business Loans 3 ~$50k - $250k (projected) ~20%+ (projected) 1. Source: SDC, includes public and 144a debt and Bloomberg (as of ). 2. Source: Index of Business Development Companies. 10-Ks as of for ARCC, BKCC, FDUS, HCAP, HRZN, KCAP, MAIN, MCGC and MRCC. 3. Please note that these are estimates based on projections and do not reflect actual data. Actual average yields and/or returns may vary significantly. REGULATED BY COMMISSION DE SURVEILLANCE DU SECTEUR FINANCIER, CSSF, LUXEMBOURG 11

12 Small Business Loans Small business loan investments generally expected to range from $50,000 to $250,000. Attractive yields in relation to credit quality, with additional upside potential through: Equity interests received or purchased in connection with loan investments. Short duration, low correlation to other asset classes, low volatility. Portfolio Statistics as of 28/2/2014 TotalNumber of Loans 417 Average Loan Size $52,594 Average Term to Maturity 10.3months Current Weighted Average Yield 38.5% High Level of Diversification Statistics as of 28/2/2014 YIELD INDUSTRY GEOGRAPHY Target Return 12% over LIBOR REGULATED BY COMMISSION DE SURVEILLANCE DU SECTEUR FINANCIER, CSSF, LUXEMBOURG 12

13 Invoice Discounting Invoice discounting is a process whereby companies draw short-term loans against outstanding in voices they have issued to clients. This facility allows companies to take control of their finances, improve their working capital and cash flow positions, and thus grow their businesses more efficiently. For investors, invoice discounting can represent a high return, secure investment, with low correlation to equity and bond markets. Previously only available to high street banks and a few specialized boutiques, internet (cloud-based) technology now allows investors and borrowers to be brought together to participate in invoice discounting in a more efficient manner, via online platforms. Synthesis has gained privileged access to a leading online provider, and is in the process of setting up other, similar, relationships to expand its participation in invoice discounting and other forms of receivables finance. Invoices are selected for investment according to a strict set of criteria, with independent analysis of the underlying creditors and debtors. REGULATED BY COMMISSION DE SURVEILLANCE DU SECTEUR FINANCIER, CSSF, LUXEMBOURG 13

14 Invoice Discounting Market Statistics by Price Grade Volume Traded (Invoices only) 1,50% Total Unclassified Invoice Face Value 136,836,640 9,717,802 17,693,592 43,282,422 28,478,741 15,020,949 9,332,638 4,278,470 1,405,058 7,626,967 Volume Advanced 112,328,233 8,438,572 15,054,682 35,837,759 23,187,166 11,811,816 7,304,387 3,268, ,903 6,480,173 Repaid 97,087,849 8,231,131 11,313,004 33,657,733 16,747,056 10,624,029 6,720,847 2,981, ,582 5,870,226 Outstanding 15,240, ,441 3,741,679 2,180,026 6,440,110 1,187, , ,534 2, ,947 Amount Delinquent 1,331,557 34,762 95, ,553 30,838 32, , , ,741 0 % Delinquent 1.19% 0.41% 0.63% 1.61% 0.13% 0.27% 1.94% 6.8% 20.93% 0% Recovered 1,112,187 34,762 95, ,998 10,496 25, , , ,741 0 Crystallised Losses 27, , % Losses 0.02% 0% 0% 0.08% 0% 0% 0% 0% 0% 0% Ongoing Recovery 83.53% 100% 100% 70.94% 34.04% 78.81% 82.61% 100% 100% Final Recovery 97.53% 100% 100% 93.63% 100% 100% 100% 100% Historic Gross Yield 16.88% 10.48% 11.75% 15.05% 17.62% 20.95% 24.37% 32.19% 40.34% 14.5% Current Gross Yield 10.47% 11.9% 14.37% 17.81% 20.98% 24.71% 31.89% 42.58% Monthly Yield History 1,25% 1,00% 0,75% 0,50% 0,25% 0% March 13 April 13 Source: Market Invoice May 13 June 13 July 13 August 13 September 13 October 13 November 13 December 13 January 14 February 14 March 14 REGULATED BY COMMISSION DE SURVEILLANCE DU SECTEUR FINANCIER, CSSF, LUXEMBOURG 14

15 THE SYNTHESIS TEAM Spyros Papadopoulos Chairman & CEO Spyros has over 15 years of experience in alternative investments. He began his career in Private Banking, first with Citigroup in London and Geneva, where he was the key contributor to the development of both the Spanish and Greek Wealth Management Desks, and then with Société Générale in Athens, where he was instrumental to the expansion of the Greek Private Banking division. Spyros resigned from Private Banking in 2006 to set up an asset management company for Deloitte, before returning to London as Director of the Hedge Fund Absolute Return Partners. He left to found Synthesis in June His clients came through unscathed, and indeed profited, from the crises of and 2007-present. Fluent in English and Spanish, Spyros holds the Investment Management Certificate of the CFA-Society of the UK. Marc Lefèbvre Chief Compliance Officer Mr. Lefèbvre started his career as an auditor of Investment Funds at PricewaterhouseCoopers. He then moved on to Nordea Bank to assist with Compliance, Anti-Money Laundering and Legislation issues and set up controls and processes to ensure efficient monitoring. In his next role as board member and conducting officer with Glitnir Bank, he was instrumental in setting up the Investment Fund arm of the bank, and was responsible for monitoring accounting, risk and compliance of the Luxemburg unit.. Subsequently he set up his own advisory firm, LEVeL Advisory, providing services to the asset management and banking sector. The services cover, amongst others, independent board member and conducting officer in private equity and asset management structures (UCITS III). He holds a Master Degree in Finance and a Master Degree in Control from HEC. He is a certified director from the Luxembourg Institute of Administrators (ILA), a certified Senior Fund Specialist and Compliance Officer from Institut de Formation Bancaire in Luxembourg. Manuel Bertrand CFO-Chief Financial Officer Is a CSSF authorized director in the private equity fund sector acting as executive or non-executive director. He is also the CFO of BWB Group s.à r.l., a Luxembourg-based holding company, with the mission to restructure thoroughly the legal, operational and financial organization both at parent company and at subsidiary level (11 subsidiaries + 2 investment funds 5 countries) with a strategy to eventually lead the Group towards an IPO. Manuel previously headed the Finance & Administration management activities of several industrial companies, both at subsidiary and mother company level. His primary focus was to ensure the existence and the communication of accurate and reliable financial data, both on individual legal entity and consolidated level, either on actual or forecasted/budgeted figures, and therefore to strongly contribute to the realization of the company s operational objectives. He was also responsible for the Human Resources, Treasury, Internal controls, Tax & Legal as well as several key IT projects such as ERP implementation. He was a member of the Directors Committee and had therefore an active participation in strategic decision processes. Manuel gained his first experience at PricewaterhouseCoopers Liege where he was in charge of the audit of some major industrial companies such as Volkswagen Brussels, Caterpillar, IT subsidiaries of Dexia, Saint-Gobain subsidiaries. Holds a Commercial Engineer degree from HEC Belgium. Aristides Protopapadakis Managing Partner Risk Management He has a banking background, with a wealth of experience in derivatives, risk analytics, and financial software systems. Prior to setting up Systemic Risk Management Solutions, he acquired extensive experience in the above areas while holding senior positions at Citibank, ABN-Amro, and Bank of America in Treasury and Risk Management units. His vision for a sophisticated, yet practical and competitive risk management solution for market and credit risk led to the development of RiskValue and the creation of Systemic Risk Management. SYSTEMIC has a very successful 15-year track record and is the incontestable market leader in its home country, in its areas of expertise. Its clients include the most successful Funds, Discretionary Portfolio Managers, Banks, Insurance Companies, and Brokers of its region. Aristides Protopapadakis holds an MBA in Commercial Engineering from the Solvay Business School (Université Libre de Bruxelles). REGULATED BY COMMISSION DE SURVEILLANCE DU SECTEUR FINANCIER, CSSF, LUXEMBOURG 15

16 THE SYNTHESIS TEAM Stavros Athanasiou Senior Advisor Trade Finance Before joining Synthesis, Stavros worked for seven years as the Head of Receivables Finance for Credit Agricole in Athens, where he was responsible for business across four countries of Southern Europe. In the 15 years prior to that, Stavros held various commercial banking executive positions in Greece and the US, encompassing Private Banking, Risk Management and Commercial Loans. He started his career with KPMG, working for both the audit and consulting sides of the firm. Stavros graduated with a B.A. in Economics from the University of Liverpool, and holds an MBA from Cardiff University. David Phipps Senior Advisor Commodities Trade Finance Having worked in the financial industry for almost 30 years, David has built up significant and broad experience in Commodity Risk Management, Commodity Trading and Financing of Commodities. David has held senior positions at investment banks, including Head of Commodities at ABN AMRO Bank NV, Co-Global head of Commodities at ETD UBS AG and more recently CEO of a London Stock Exchange listed trading company and Head of Portfolio Management at a fund of funds. David has extensive knowledge of Market and Credit Risk Management including risk mitigation products in Physical, on Exchange and OTC products, as well as Commodity Finance including Structured Solutions. David has extensive experience in Business Development from start-up to ongoing development of existing businesses. Yvan De Munck Senior Advisor P2P Lending Yvan De Munck is a Managing Director with R.W. Pressprich & Co., an institutional fixed-income broker/dealer and investment boutique headquartered in New York City, where he focuses on developments in the FinTech space, with a particular interest in Peer-to-Peer & Online Direct Lending strategies. Most recently, he was a Principal and Head of Business Development at Eaglewood Capital Management LLC, a leading New York-based investment management firm specializing in online lending strategies. Prior to that he ran equity sales desks in New York City for Fortis, KBC and Swedbank. James Levy Senior Advisor Business Development James is an investment advisor and financial services entrepreneur with over twenty years of experience in private banking focused on the High Net Worth/Business-Owner segment. He began his career in 1991 at Merrill Lynch International Bank in Madrid as a Financial Consultant, and left Merrill Lynch in 2003 as Senior Vice President to found Private Wealth Advisors (a boutique investment advisory firm acquired by Banco Inversis in 2009). Prior to joining Synthesis, James founded P2P Finance, an investment consulting firm focused on helping high net worth clients design strategies to preserve and grow their financial wealth through low volatility, non-market, alternative finance solutions. James holds an M.B.A. from Syracuse University (New York) and a B.A. in International Affairs from Lafayette College (Pennsylvania). REGULATED BY COMMISSION DE SURVEILLANCE DU SECTEUR FINANCIER, CSSF, LUXEMBOURG 16

17 P2P Lending Research Source: LIBERUM REGULATED BY COMMISSION DE SURVEILLANCE DU SECTEUR FINANCIER, CSSF, LUXEMBOURG 17

18 Research P2P lending is a global phenomenon: largest markets US, China and UK REGULATED BY COMMISSION DE SURVEILLANCE DU SECTEUR FINANCIER, CSSF, LUXEMBOURG 18

19 Research The P2P sector is the Walmart / Ryanair of financial intermediation; with costs 60% lower than banks as savers and borrowers connect more efficiently. Lending Club expects to be 60% more efficient than the equivalent banking business, on costs as % of loan balances, by 2015e Cost base comparison 2015e: Banks vs. Lending Club (costs as % loans outstanding) P2P has no expensive branches/ legacy systems/ expensive regulatory capital to service 2013e costs as basis points of outstanding loans for P2P platforms and credit card providers* In 2013e, P2P platform costs were 420bps of loan balances vs. 695bps for comparable banking business; 40% more efficient Over time, economies of scale will further increase P2P s relative efficiency REGULATED BY COMMISSION DE SURVEILLANCE DU SECTEUR FINANCIER, CSSF, LUXEMBOURG 19

20 Research For institutional and High Net Worth investors: P2P loans offer attractive returns / useful diversification P2P expected net yield compares favorably with other asset classes P2P yields vs. other asset classes New asset class = valuable diversification. Distribution of Lending Club monthly returns, from inception to December 2013 Attractive risk adjusted returns: 4.4x P2P Sharpe ratio for Lending Club loans originated in 2009/10 vs 1.1x for FTSE all Share over same time period. REGULATED BY COMMISSION DE SURVEILLANCE DU SECTEUR FINANCIER, CSSF, LUXEMBOURG 20

21 Research Current P2P rates are meaningfully better for savers & borrowers For US savers: Prosper and Lending Club offer savers a c. 6-9% yield pickup compared to US deposit accounts. US: Bank deposit rates vs. P2P net yields UK: Deposit rates vs. P2P net yields For UK savers: UK P2P platforms offer savers a 3% pick up vs. cash ISA rates. US: Bank loan rates vs. P2P loan rates UK: Bank loan rates vs. P2P loan rates For US Consumer Finance borrowers: P2P offers rates 1-25% lower Particularly for more credit worthy customers For UK borrowers: Consumer Finance borrowers, P2P platforms offer loan rates 1.1% lower than typical bank rates. REGULATED BY COMMISSION DE SURVEILLANCE DU SECTEUR FINANCIER, CSSF, LUXEMBOURG 21

22 Research P2P awareness rising everywhere; up by 70% since start of 2012 Peer to Peer Lending Google Trends Lending Club Google Trends Prosper Loans Google Trends Zopa Google Trends RateSetter Google Trends FundingCircle Google Trends REGULATED BY COMMISSION DE SURVEILLANCE DU SECTEUR FINANCIER, CSSF, LUXEMBOURG 22

23 Research P2P end game by 2024: 25-50% projected share of consumer finance and SME lending Growth projections: annual gross volume CAGRs of leading 5 platforms 2014 to 2024e: base case: 48% bull case: 59%. P2P gross loan volume, base case bn Base case: leading P2P platforms will originate 267bn by 2024e; 25% of the gross volumes in UK & US consumer and UK SME market. Bull case: leading P2P platforms will originate 535bn by 2024e; 50% of the gross volumes in UK & US consumer and UK SME market. P2P as % annual gross lending in US & UK consumer & UK SME bn 2024 P2P platform revenue pool likely to be at least 12-25bn by 2024 (for just UK and US consumer finance and UK SME) REGULATED BY COMMISSION DE SURVEILLANCE DU SECTEUR FINANCIER, CSSF, LUXEMBOURG 23

24 Synthesis Multi-Asset Architecture SICAV-SIF, SCA: SYNTHESIS P2P Risk-Adjusted Targeted Return 10%-12% over LIBOR (unleveraged) Management Fee 1.5% p.a. Performance Fee 10%, providing annual returns exceed 7,5% (not cumulatively) Minimum Investment 125,000 (or $ equivalent) High water mark Yes Status Open-ended Subscription Monthly Redemption Quarterly with 60 days notice - One year lockup Legal Form SICAV-SIF Jurisdiction Luxembourg Supervisor Commission de Surveillance du Secteur Financier (CSSF) Custodian & Administrator Banque Privée Edmond de Rothschild Europe Auditor Deloitte S.A. Legal Counsel Allen & Overy REGULATED BY COMMISSION DE SURVEILLANCE DU SECTEUR FINANCIER, CSSF, LUXEMBOURG 24

25 Disclaimer This document is not intended for any citizen of the United States or any other person or entity subject to U.S. Securities law. Without any limitation, this presentation does not constitute an offer, an invitation to offer or a recommendation to enter into any transaction. The information herein does not constitute the provision of investment advice or a recommendation; its sole purpose is to generate interest for a product proposal. Changes to this presentation may be made without notice. Opinions expressed may differ from views set out in other documents. Although the information contained herein has been taken from sources, which the authors believe to be accurate, no warranty or representation is made as to the correctness, completeness and accuracy of the information or the assessments made on its basis. The authors do not accept liability for any damage arising from the reliance on this presentation. This presentation may not be distributed by the recipient to any other person without the express written consent of the authors. Each recipient of this presentation is expected to be sophisticated and capable of independently evaluating the merits and risks of an investment in the product. If an investor decides to invest in the fund, the investor does so in reliance on his own judgement. Investing in the product reflects a particular market view the recipient of this presentation has taken independently from the authors. When making an investment decision the recipient of this presentation should rely solely on his own market and financial research and not the information contained here in. The product described herein may not suit all investors and before entering into any transaction each investor should take steps to ensure that he fully understands the product and has made an independent assessment of the suitability of the product, including its possible risks, in light of the investor s own objectives and financial situation. In particular, investing in the product may result in the return of less than the investor s original investment and even the total loss thereof. Any investor should seek advice from its professional advisors in making such assessment. REGULATED BY COMMISSION DE SURVEILLANCE DU SECTEUR FINANCIER, CSSF, LUXEMBOURG 25

26 REGULATED BY COMMISSION DE SURVEILLANCE DU SECTEUR FINANCIER, CSSF, LUXEMBOURG Head Office: 20, Boulevard Emmanuel Servais, L-2535 Luxembourg Grand Duchy of Luxembourg Tel: , Fax: (Shareholder Operational Support, Banque Privée Edmond de Rothschild Europe) (for general enquiries): Cell: &