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You have throughout the financial year immediately preceding the date below had an annual income of £100,000 or more or held throughout the financial year immediately preceding the date below, net assets to the value of £250,000 or more.

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As a US citizen you are an Accredited Investor as one of the following applies, you either have individual Income in excess of $200,000 in each of the last two calendar years or joint Income with a spouse in excess of $300,000 in each of the last two calendar years and reasonably expects to attain levels of Income this year at least equal to these amounts.[1] Or you have, and at the time of any purchase of securities of the Investment will have, an individual Net Worth, or the spouse and the investor currently has, and at the time of any purchase of securities of the Investment will have, a combined Net Worth in excess of $1,000,000.[2]

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1 Income means adjusted gross income, as reported for federal income tax purposes, increased by the following amounts: (i) the amount of any tax exempt interest income received; (ii) the amount of losses claimed as a limited partner in a limited partnership; (iii) any deduction claimed for depletion; (iv) amounts contributed to an IRA or Keogh retirement plan; (v) alimony paid; and (vi) any amount by which income from long-term capital gains has been reduced in arriving at adjusted gross income pursuant to the provisions of Section 1202 of the Internal Revenue Code.

2 Net Worth is the amount by which your total assets at fair market value exceed your total liabilities, with the following adjustments:

(i) the estimated fair market value of your primary residence is excluded from your total assets; (ii) the amount of any indebtedness secured by your primary residence up to the fair market value of such residence is not treated as a liability; (iii) the amount of any indebtedness secured by your primary residence that exceeds the fair market value of your primary residence is treated as a liability; and (iv) the amount of any debt secured by your primary residence incurred during the 60 days immediately preceding your purchase of any securities of the Company is treated as a liability (even if the estimated fair market value of your primary residence exceeds the aggregate amount of indebtedness secured by such primary residence), unless such debt resulted from the purchase of your primary residence during such 60 day period.

Josh Matthews
Josh Matthews
Josh is a Managing Partner and co-founder of MASECO Private Wealth. In 2008, he co-founded MASECO Private Wealth in the UK, followed in subsequent years by MASECO Switzerland and MASECO Asia in Hong Kong. Josh is also a seasoned expert in Alternative Credit and is the architect of the MASECO Asset Management multi-strategy Alternative Credit Fund.


Back to opinions
September 12, 2016
Josh Matthews

Why the opportunity in alternative credit is far broader than just p2p.

Why the opportunity in alternative credit is far broader than just p2p – AltFi Credit

Since the GFC (Global Financial Crisis) interest rates across the globe have stayed low much longer than most people have expected and this has led investors to look further afield in search of high yielding investments.  Over the past few years we have seen yields on corporate bonds, real estate, high yield bonds and P2P loans to individuals fall dramatically as more and more money has moved into these investments.  As investor interest in P2P lending has continued to increase and yields have moved lower, the search for higher yielding investments has entered a new stage.

In a personal capacity I started lending on the Zopa P2P platforms 6 years ago when yields were much higher, default rates were lower and underwriting standards were higher across the industry.  Since then, in order to place the flood of money that has become interested in P2P lending, yields have fallen dramatically and underwriting standards loosened.  As this change occurred, I stopped lending P2P to individuals and have diversified to other higher yielding categories that by and large are still relatively undiscovered.

Some examples of areas where I and my clients are now invested yield in the high single or low double digits (post defaults) are described below.

I have been keen on lending against real estate development projects in Canada where there are only 5 big banks and their lending criteria is very restrictive.  I invest with experts who some of whom I have known for more than twenty years and who have been active in this space for close to sixty years.  They are conservative and only lend 65% or less of the land value and are very experienced dealing with defaults that happen from time to time.  When loans are underwritten well and collateralized, defaults are sometimes a benefit to us lenders.  During the GFC there was no dip in yields because the loans were on average over collateralized by property that continued to be worth more than the value of the loans because of the low loan LTV (loan to value).

I have also lent against life insurance policies in the US that are designed to provide help people who are ill with cancer so that they don’t need to sell their life insurance policies to vulture funds at huge discounts.  An old friend I have known for close to forty years is the market leader in this area and been helping people for more than a decade.  He left an incredibly lucrative career as a partner at a leading law firm to use his expertise and pursue his passion in this space.  As this strategy is usually less lucrative than buying policies and is also a legally complex area, there are not many others that are willing to offer this alternative structure.

International banks have continued to pull out of Africa because of problems and capital requirements back home, I have carefully lent money to commodity wholesalers and traders in Africa.  Africa is home to some of the fastest growing countries in the world and is also one of the most under-banked areas in the world.  As there is so much demand for capital and so little supply, by being selective and working with a small handful of companies/borrowers, lenders can lend at high interest rates with surprisingly low default rates.  When there are inevitable defaults, having good collateral is always helpful because it can help to mitigate against losses.

Another area with a shrinking banking industry is Spain.  One of the biggest problem’s many Spanish companies have is getting paid on a timely basis from the local, regional or national government for contracts they have completed.  Structuring loans collateralized against government receivables that give companies reliable working capital can be highly lucrative for investors.  I invest with an old friend who is well connected in Spain and he is also able to source many real estate lending and leasing opportunities in the region.

Finally, micro SME (Small and Medium Size Enterprise) lending in the US is very interesting at the moment.  These are loans that are usually less than $100,000 in size, but bigger in size than Merchant Cash Advances.  The short term loans are typically made to companies across the US and across industries that have been in business for on average 10 years or longer.  The company borrowing the money usually has an opportunity that they would like to execute on immediately and either cannot get bank financing or it will take them too long to get approval by a bank.  SME loans by banks are still well below pre-GFC levels and are not expected to surpass those levels for some time which should keep yields at their current elevated levels.

These are only a few of the many places I and my clients have invested in over the past few years but it highlights some of the opportunities beyond P2P loans to individuals.  In future articles I will discuss ways to help mitigate risk whilst investing in Alternative Credit and the five C’s of Lending.