Octopus Choice P2P Platform Launches
The research team at Orca published an article in April bringing retail investors the news that Octopus Investments is set to offer a new P2P platform onto the UK market. The first established investment provider to enter the fray, Octopus may well be the catalyst for bridging the gap between the advised market and peer-to-peer lending; something that has been poised ever since financial advisers were giving permission to recommend P2P products in April.
Octopus Choice Purpose
Simon Rogerson, Chief Executive of Octopus Investments, explained that the Octopus Choice platform has been designed to bridge the gap between P2P lending and the advised community, where P2P products are met with reticence from many IFAs and Wealth Managers. This is predominantly due to the (often incorrectly) perceived level of riskiness involved in peer-to-peer investments.
"It’s a new asset class and most of the firms in that market are not known to financial advisers and don’t have a proven track record, so we overcome that nervousness to some extent."
- Simon Rogerson, Chief Executive, Octopus Investments
Octopus Choice Lending
The website home page opens with the following:
Keen to capitalise on the growing success of peer-to-peer lending UK, Octopus aims to provide its existing user-base of advisers and also private investors a platform that provides secured investment opportunities, returning attractive risk-adjusted returns.
Target interest rate: 5.1% p.a (no fixed)
Borrowers: UK property developers
Security: Asset backed – 62% loan to value (LTV)
Min. investment: £10
Interest repaid: Monthly
Octopus only offers loans that are underwritten by realisable assets. To add a second tier of protection, the P2P platform invests its own funds into each and every loan, taking a first loss position to ensure investors receive loan repayment first in the event of a loan default.
1. Asset backed security
Each and every loan is secured by bricks and mortars ensuring borrower default is mitigated to a reasonable level. Octopus Choice takes a 62% (target) LTV on all loans, with a max LTV of 70%. Example: £1,000,000 asset value = £620,000 (targeted) loan. If the property market depreciates and the borrower defaults, there should, in theory be sufficient value in the asset to recover the full loan amount.
2. Octopus lend with their customers
Octopus Choice stresses the point that they ‘invest alongside you’, meaning they have exposure to risk on their balance sheet, adding a level of security for investors. Octopus Choice invests 5% in each loan.
3. Experienced lending
Investors may seek comfort in potentially Octopus Choice’s greatest asset, their experience. Octopus Investments has made over £2bn worth of loans – 3,500 loans – with less than 0.1% loss rate, to-date.*Historic bad debt rate is not an indication of performance in the future.
Octopus Choice will be monitored closely by the peer-to-peer lending market in the coming months and years. The platform is part of an established and revered investment firm that serves financial advisers, primarily. The Choice platform could be the stimulant required to see IFAs start recommending P2P investments to their clients.