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Pensions are getting in on the P2P act

Posted 2 years ago

Pensions are getting in on the P2P act
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If you are unhappy with the low interest rates that cash savings presently offer and typical income alternatives like equity income funds and corporate bond funds, well you’re not alone.  Pension schemes feel the same and increasingly they are dipping their toes into alternatives like lending to small businesses. Pension schemes for Transport for London, Vodafone, Mineworkers and most recently the parliamentary contributory pension fund have all explored alternative forms of credit (lending) to improve their investment returns.

In a statement, members of the parliamentary contributory pension fund were told that alternative lending offered increased levels of diversification, another source of income and their fund could benefit from “the illiquidity premium associated with this type of debt mandate” – which is a fancy way of saying that there could be a much better reward for the risk you are being asked to take in P2P type debt than there is in more mainstream corporate bonds.

So why does this matter to businessagent.com users? Well it is an endorsement of the idea of lending to small businesses directly as an investment by institutions that invest professionally. It also means that big money is flowing to small businesses looking for capital from alternative sources to the Banks, and more choice and competition generally means good news for SMEs too.  

Tagged: Pensions bonds

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