Investors could see considerable growth in the number of crowdfunding funds available on the market as the hunt for yield continues, according to global advisory and administration firm Maitland Group.
Speaking to Funds Europe, Nitzan Olsha, partner at the firm, said he saw significant potential for growth in this type of product.
“There’s definitely going to be a trend that develops as consumers communicate more and more the demand for [crowdfunding investments].
“I think we will see, without a doubt in my mind, quite a high growth of new funds being formed to service this particular demand.”
The funds can take different forms, either focusing on equity investments or loans to businesses and individuals.
Some funds managers have already backed the crowdfunding concept with enthusiasm. Star manager Nicola Horlick, for example, launched her own crowdfunding platform Money&Co last year.
Olsha says that he sees crowdfunding funds as “essentially another asset class” that fund managers will be keen to develop.
“I think the fund managers are going to say: ‘There’s a whole asset class opening up here. We’ve got the resources and skills to evaluate the investments and on the other side we’ve got investors clamouring for exposure’.”
Olsha sees potential in the products as an opportunity to diversify but adds that a standardised set of reporting guidelines are needed to establish clear comparables in this part of the market, such as standard definitions for default rates or more granular evidence of which P2P platforms are performing most effectively.
“There will be pressure from the regulator, and pressure from the industry that I think would see the benefit of adopting its own standard set of reporting guidelines,” he adds.
It will also be important to ensure the original focus of crowdfunding – providing opportunities for ‘the man in the street’ –
is not lost. Olsha refers to the US, where large financial institutions are big players in the crowdfunding space.
“[In the US] the market’s a little bit distorted at the moment, there are insufficient protections and an insufficient spread of opportunity to invest being given to the true crowd.
“[In the UK] I think the government has mentioned that they’re quite alive to this … when the market opens up properly to financial institutions we’ll see them saying: ‘We want you to be able to participate but we’re going to work out a way that you can’t dominate the scene’.”
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