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Direct Lending Investments Suspends Investor Withdrawals

Leading fund manager suspends withdrawals after a large holding defaults

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[Update 3/20/2019: Bloomberg is now reporting that Brendan Ross has resigned as CEO of Direct Lending Investments and that the SEC is investigating. Also, a new issue has emerged where one of its investments has been materially overstated.]

 

[Update 3/25/2019: The SEC has now filed suit against Direct Lending Investments charging the firm “with a multi-year fraud that resulted in approximately $11 million in over-charges of management and performance fees to its private funds, as well as the inflation of the private funds’ returns.” Bloomberg has more on the story here.]

 

[Update 8/12/2020: Brendan Ross has been arrested and charged with 10 counts of wire fraud. See the Reuters story here.]

 

Direct Lending Investments is one of the largest fund managers in the alternative lending space. I was an early investor in their first fund and over the years I documented my returns and experience on Lend Academy.

Earlier this month Brendan Ross, the CEO of Direct Lending Investments, Inc., sent a letter to investors notifying them that they have suspended withdrawals and redemptions effective February 8, 2019. Lend Academy was able to obtain a copy of this investor letter, dated February 11, that provides some color into what happened. The reason given was the delinquency of a large holding, VOIP Guardian, a telecom receivables factoring company.

The total assets in the fund as of November 30, 2018 was $758 million and the principal balance with VOIP Guardian was $192 million or 25% of the total. What has happened apparently is the telecom companies that do business with VOIP Guardian have failed to pay their obligations. From the investor letter:

VOIP Guardian’s amounts due from these delinquent obligors is now $160 million, with the result that VOIP Guardian in turn remains unable to make its payments due to the Funds. We now suspect that the cessation of payments is the likely result of misconduct (although we have not yet determined by whom) and that a substantial portion of the $160 million may not be recoverable.

A recent Bloomberg article quoted the CEO of VOIP Guardian saying that some long time clients stopped paying their bills and that his company has done nothing wrong. We don’t know why these companies have stopped paying their bills and that matter is currently being investigated.

[Read more…]

LendingRobot Digital Wealth Platform Rolls Out a New Alternative Lending Hedge Fund

LendingRobot has a new offering for investors looking to allocate to p2p lending.

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LendingRobot_Fund_2017

Today LendingRobot launched a new alternative lending hedge fund called LendingRobot Series to add to its suite of products. This fund will allocate to Lending Club, Prosper, Funding Circle and other online loan origination platforms. Their fees are on the lower end of the spectrum with a 1% management fee and fund expenses capped at 0.59%. The minimum investment is $100,000 and the fund is open to accredited investors.

The fund is structured as a series investment trust, which means that they can offer several different strategies at once. Investors can choose between aggressive or conservative strategies and between short and long term time horizons (20-36 months). Net returns are expected to yield up to 9.66%.

LendingRobot_Fund_Risk_Maturity

In typical LendingRobot fashion, the fund will use technology to keep expenses low. LendingRobot’s technology platform will be used to select loans and execute trades. It will use blockchain technology to deliver a ledger of all transactions to see exactly which loans have been selected for the fund, thereby increasing transparency while simultaneously making the annual audit more efficient and less expensive.

LendingRobot offers individuals and wealth managers fully automated investment accounts on Lending Club, Prosper and Funding Circle. They have 6,500 clients representing over $125m in assets under management and they have submitted over 4 million trade orders to date. The company has raised $3m in a Series A funding round led by Runa Capital.

Navigating the Publicly Listed Funds in the UK

We delve into the details of five publicly listed funds in the UK that invest in marketplace lending.

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uk_listed_funds_marketplace_lending

Many investors like the simplicity, ease and liquidity of investing in a publicly traded fund. There are currently five closed end funds that are publicly listed on the London Stock Exchange and focus on the marketplace lending industry. In this post we’ll share the details of each fund and dig into the differences between them. As you will note from the table below, most of the funds are trading at significant discounts to their NAV.  The Funding Circle SME Income Fund trades closest to it’s NAV at a 2.5% discount as depicted below.

FUNDP2P GLOBAL INVESTMENTS (P2P)VICTORY PARK CAPITAL SPECIALTY LENDING
(VSL)		RANGER
DIRECT
LENDING
(RDL)		GLI ALTERNATIVE FINANCE (GLAF)FUNDING CIRCLE SME INCOME FUND (FCIF)
Market Cap
(millions)		£729.29£306.09£149.97£94.57£147.75
Performance (YTD)*-15.12%-14.63%3.96%-7.89%-2.62%
Leverage1x1x-1.5x0.5xNo0.25x-0.5x
Fees1% net assets, .5% leveraged assets, 15% performance1%, 15% performance1%, 10%
performance		0.8%N/A
Premium/Discount to NAV(15.97%) - June, 2016(11.75%) - May, 2016(17.38%) - June 2016(11.41%) - June 2016(2.5%) - June 2016

*NAV performance YTD through time of writing on August 2, 2016, dividends excluded.

P2P Global Investments

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Industry Veterans Create Private Equity Fund for Marketplace Lending

The new fund from LendTech Capital Partners will focus on equity investments in early stage companies.

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LendTech_Fund_Launch

LendTech Capital Partners is a new investment advisor focused on equity investments in the marketplace lending industry. Their newly created fund brings together industry leaders Liberum, Ranger Capital, and Velocity Venture Group.

Liberum is a London based investment bank that has raised over $1.9 billion for marketplace lending funds and platforms. Ranger Capital has two offerings in the marketplace lending industry. The Ranger Specialty Income Fund is their private fund that invests on US platforms and the Ranger Direct Lending Fund is a publicly traded fund on the London Stock Exchange (RDL). The final partner, Velocity Venture Group has investment experience in the payments, transaction services and banking industries deploying over $3 billion. We spoke to Bill Kassul, who is Partner at the Ranger Specialty Income Fund to learn more about LendTech Capital Partners.

They began talks about the creation of what became LendTech in late 2014. Both Liberum and Ranger have been around the marketplace lending industry for quite some time and have had an immense amount of experience doing due diligence and making debt investments on various platforms. They continued to see companies flourish as the platforms were able to bring in debt investors and the team felt they were leaving money on the table by only having exposure to debt investing. There were instances where they could negotiate warrants and options as part of these deals, but they still lacked a focus when it came to private equity investments.

Ranger doesn’t have a private equity group, but they saw an opportunity to bring on others with experience in this area. With their public fund in London, they had the option to invest 10% of the funds raised in equity, but for many reasons they have not done much in the way of equity investments so far. They didn’t see the need to increase the risk in the fund which is already doing well returning 12%. In addition, many of the platforms they work with are already profitable so they have little need for capital in exchange for giving up equity. [Read more…]

Funding Circle Announces Intention to Offer New Fund to UK Investors

This new fund will offer a hands off way to invest in Funding Circle small business loans.

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Funding Circle logo

As marketplace lending continues to mature, we are seeing more options to access this asset class. One of the major themes we’ve seen recently are new fund announcements and several funds set to launch in the US, joining the many funds in existence in the UK. However, none of the funds to date have been offered by the actual marketplace. Funding Circle will be the first company to create a fund for investors in the UK to invest in small business loans. Like other funds in this industry that have come before it, this will be a closed end fund.

The major appeal of investing through a fund for a retail investor is that they do not have to hand select loans. Many investors want a hands off approach and certainly the new Funding Circle SME Income Fund will accomplish that goal. Although all investors will be able to participate, the fund will be lead by institutional investors. [Read more…]

Ranger Direct Lending Fund Launches on the London Stock Exchange

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Ranger Capital

Today, a new direct lending fund from Ranger Capital will be listed on the London Stock Exchange. This will be the fourth fund of its kind to be listed on the London Stock Exchange. The offering for the Ranger Direct Lending Fund was oversubscribed at £10 per share with a total market capitalization of £135 million and will be listed with the ticker RDL. This isn’t Ranger Capital’s first venture into the lending space. Back in September of 2013, Lend Academy featured an article about the Ranger Specialty Income Fund, their private fund that invests in Prosper and Lending Club notes.

I reached out to Bill Kassul, who is Partner at the Ranger Specialty Income Fund to learn more about the new fund offering. What is most interesting is that Ranger Capital is a US based firm, but decided to list this fund on the London Stock Exchange. Bill mentioned that there were three reasons for this. [Read more…]

New Fund Launching That Uses Artificial Intelligence to Pick Loans

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Ranger Capital

Gary Melara has been working with artificial intelligence (AI) programs for decades. So, when he first considered investing in Prosper and Lending Club back in 2009 he wondered if he could apply that technology to his loan selections. With the wealth of data that Prosper and Lending Club make available he was able to do just that. He has been investing using his AI program since early 2010 with some impressive returns.

Scott Canon is the president of Ranger Capital, a $3 billion investment management company based in Dallas offering both traditional and alternative investment products. He became interested in peer-to-peer lending last year and began exploring the space. Like most of us he was impressed with the high yields and low volatility of this new asset class.

To create a successful fund Scott knew he needed a top-notch portfolio manager who could create a model to generate the best ROI. He interviewed several people for this position including Gary. It was very clear to him that Gary’s approach was by far the best and his external consultants agreed. Gary was also the best fit culturally for Ranger Capital. So, they began laying the groundwork for putting together a fund.

I chatted with both Gary and Scott last week as they told me about their new fund, Ranger Specialty Income Fund, which will be launching shortly. The fund will be investing in Lending Club and Prosper notes initially but down the road they may expand to other high yield opportunities including student loans, small business and international lending platforms.

The Artificial Intelligence Algorithm

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ABOUT LENDIT FINTECH NEWS

LendIt Fintech News, Powered by Lend Academy, has been bringing you all the news and information about fintech and online lending since 2010 when it was founded by Peter Renton. We not only have the industry’s most active news site, but also the largest investor forum and the first and most popular podcast.

We are a team of fintech enthusiasts who have been covering the industry for many years. With a deep knowledge of online lending, digital banking, blockchain, artificial intelligence and more our team covers the daily news and writes in-depth editorials.

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