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Alternative Market Briefing

Online alternative lending goes mainstream

Monday, October 22, 2018

Laxman Pai, Opalesque Asia:

While alternative lending is currently gaining traction among borrowers, it's also becoming a formidable asset class in its own right, with the U.S. market now accounting for an estimated $50 billion of annual origination.

Born out of peer-to-peer lending, online alternative lending has gone mainstream, presenting new opportunities for small businesses, consumers and investors.

According to Morgan Stanley Investment Management's study, what began as "peer-to-peer" marketplaces bringing together borrowers and lenders has evolved considerably in recent years.

Alternative-lending platforms now span many categories, including unsecured consumer, small-business and other forms of specialty financing, it said.

"Most loans underwritten by alternative lending platforms are now funded by institutional investors, and the largest platforms are disrupting the classic neighborhood-bank-lending model by playing to the strengths of fintech: low operating costs, user-friendly websites or mobile apps and innovative underwriting models that harness Big Data and better reflect the realities of today's mobile-first consumers," said the study.

As alternative lending comes to the fore, it offers investors an opportunity to fine-tune their strategies-i.e., yield, credit risk and duration-just as they do with traditional fixed-income asset categories.

Even so, successful outcomes require expertise in fixed-income investing, insigh......................

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