16 September 2015 | Investment Companies | Direct Lending

P2P Global Investments

Price / NAV

1,048 / 1,009.5

Premium & 12m range (%)

3.8 (1.0 to 19.2)

Yield historic / est* (%)

Market cap (m, ords + C shares)

4.4 / 6.3
898.0

Objective: attractive income and capital growth

via alternative finance assets originated through
online platforms, primarily consumer & SME
loans and corporate trade receivables
Target dividend
Target returns

At least 6%-8% of issue price

Derived from loans with 5%-15%
expected returns + gearing

Listing / Domicile

Main Market / UK

Company launch

29 May 2014

Investment Manager
Key individuals

Eaglewood Capital

Simon Champ, Abror Ismailov

Ann Management Fee

Perf fee

1% of net assets

15% of NAV returns with HWM

Gearing (Jul 2015) 30%-40% of NAV (max 150%)

NAV frequency

Monthly

Dividend xd

Jan, Apr, Jul, Oct

Dividend pay

Feb, May, Aug, Nov

Continuation

2019 AGM and every 5yrs after

GBP TR %

3m

6m

1yr

Since
launch

NAV

2.0

3.5

5.7

6.3

Price

-1.3

-5.7

1.9

9.2

P2P Price ( ), NAV ( ), NAV + Dividends (

1,200

1,200

1,150

1,150

1,100

1,100

1,050

1,050

1,000

1,000

Equity Research | UK

(LSE: P2P LN)

Tip of the iceberg

P2P Global Investments (P2PGI) is the first listed fund dedicated to
investing in platform-originated credit assets. Within 14 months of its
launch it raised an unprecedented 920m. In our view, this extraordinary
level of demand is a reflection of the great potential of this nascent asset
class and investors confidence in the managers position of strength.
Nascent asset class, bank disintermediation, both lender and borrower better off
Peer-to-peer (P2P) lending, where investors are lending to borrowers via platforms
that act as intermediaries, is a business model that emerged in 2005, enabled by
advances in financial technology. The model has started to take market share from
traditional lenders, having the competitive advantage of significantly lower costs,
which facilitate lower rates for borrowers and higher investment returns for lenders.
6%-8% target dividend, implied expected total returns of 10%+
P2PGI targets a dividend of 6-8% (on the issue price) and capital growth by leveraging
up (target 70-80% of NAV, or 40-45% LTV) platform-originated loans with targeted
annualised returns of 5-15%. The managers make the point the target dividend can be
met without leverage. However, leverage enables them to achieve the same returns
by investing in higher quality loans (i.e. with lower expected defaults). Investments in
platform equity stakes are a further and significant source of potential capital growth.
First mover advantage, position of strength
P2PGI has made the most of its first mover advantage, securing valuable capacity
deals with platforms, putting in place the technological infrastructure necessary to
process vast number of loans, developing a proprietary credit selection system (every
single loan is assessed individually) and quickly reaching impressive scale.
Granular portfolio, mostly US and Europe, 75% consumer, 11% average coupon
As at 30 June 2015, the 470m proceeds of the first two equity raisings were fully
invested in c.180,000 loans, originated on 15 platforms, mostly consumer and mainly
in US and Europe, with an average coupon of 11% and maturity of less than five years.
Company and portfolio key metrics, 30 June 2015

950
May-14

Oct-14

Mar-15

950
Aug-15

Source: Bloomberg. Data as of 14 September 2015

* yield estimate based on annualising the last full

quarter dividend (i.e. 66p = 16.5p x 4)

Net assets* (fully invested)

Gearing
No of platform capacity agreements
No of individual loans (look-through)
Weighted average coupon of loans
Weighted avg maturity of loans
Equity or equity options (% NAV)
Combined portf breakdown 31 Jul 2015

469.6m (221.0m in ords, 248.7m in C share)

30-40% of NAV (target 70-80%, max 150%)
15 (ranging in term from 5 years to evergreen)
c.180,000
11%
Not disclosed, but at loan level max is 5 years
In 10 platforms (3.14% ords / 2.47% C share)
59% US consumer, 16% European Consumer,
11% European SME, 5% US SME, 1% Asia Consumer,
3% Equity, 6% Cash

*The C share class in existance at 30 June 2015 was converted in ordinary shares on 22 July 2015. A further 450m was raised
via a second C share class on 24 July 2015, currently trading under ticker P2P2 LN. Source: P2P Global Investments PLC

Monica Tepes, CFA

Investment Companies Analyst
mtepes@cantor.com

To watch: deployment, re-investments, defaults, cash cover, credit selection alpha

It is early days for the P2P lending sector and we look forward to more portfolio
disclosure and detailed performance attribution as track records are being built. In
particular, we would closely watch the gearing, dividend cover, defaults compared to
expectations and look for evidence of alpha creation via credit selection.

This is a marketing communication. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is
not subject to any prohibition of dealing ahead of the dissemination of investment research. However, CFE has put in place procedures and controls designed to prevent
dealing ahead of marketing communication. Please see important regulatory disclaimers and disclosures on page 15.

P2P Global Investments | 16 September 2015

The P2P model

The P2P model

The P2P lending model
P2P lending is a direct lending concept whereby investors are lending to borrowers via
platforms (predominantly online) that act as intermediaries.
Another bank disintermediation story, this business model was originated in 2005,
driven by advances in financial technology, and has begun to take market share from
the more traditional lending operations of commercial banks.
The peer-to-peer (P2P) lending model - illustration

Principal +Interest

LENDERS
(INVESTORS)

BORROWERS
Individuals
SMEs

PLATFORMS

Originationfees

Servicingfees

Individuals
Institutions
Funds

Funding

Source: Cantor Fitzgerald Europe Investment Companies Research

The platforms main competitive advantages over traditional lenders are:

Significantly lower operating and regulatory costs this allows the borrowers and
lenders to benefit from the cost savings (borrowers borrow at lower rates and
lenders can achieve better investment returns)
Offer direct access to loans the lenders select and buy/own the loans
Have greater flexibility to innovate
Average P2P net yields* vs. UK bank lending rates

UK deposit and bond rates vs. average P2P net yields*

14%

7%
6%

12%

5%

10%

4%
8%
3%
6%
2%
4%

1%

2%

0%

0%
Zopa

RateSetter

Hitachi

AA

Nationwide

Sainsbury's

UK bank
current
account

3yr UK BBB UK bank 2yr 5yr UK BBB 3yr Zopa P2P

3yr
corporate term deposit corporate
loans
RateSetter
bonds
bonds
P2P loans

Source: P2P Global Investments PLC (Zopa, RateSetter, Funding Circle, Bank of England,

Source: P2P Global Investments PLC (Zopa, RateSetter, MoneySupermarket

Bloomberg ). *All rates shown are as of January 2014 and based on 3 year loans for 5,000

All rates shown are as of January 2014 and based on 3 year loans for 5,000

Funding
Circle P2P
loans

A nascent market, vast opportunity for growth

*Bank of England, September 2014
Harvard Business School The State of Small
Business Lending, September 2014

While the amounts lent via platforms have grown exponentially over the last few
years, in absolute terms, these loans still represent a small fraction of all outstanding
consumer and SME loans. BoE* puts the market size for SME loans at 171bn, with
only c.1% originated via online platforms. The US market is estimated by Harvard
Business School** at over $1tn, with less than 1% originated via online platforms.
Cantor Fitzgerald Europe Research

Platform asset classes

P2P Global Investments | 16 September 2015

Platform asset classes

The concept of connecting borrowers and lenders via platforms is being applied to an
increasing range of products. However, the most developed offerings currently are in
the areas of consumer debt, SME debt and corporate invoice receivables, with leading
platforms in each of these areas seeing significant growth in recent years.

Consumer loans
The global P2P consumer loan business is a multi-billion dollar industry that matches
retail borrower members with retail and institutional capital at rates that are
competitive with those offered by traditional banks. As at 30 April 2015, total
consumer credit outstanding in the US stood at US$3.38tn (Source: US Federal
Reserve) and the EU market size for outstanding consumer debt was 566bn (Source:
European Central Bank).
The cost effective origination model operated by platforms allows certain consumers
to borrow money at interest rates at which banks would generally not be able to cover
their cost base. For example, in the US, certain consumer borrowers have the
opportunity to obtain small loans of up to 5 year terms at interest rates below 6% p.a.
For lenders, consumer platforms offer net returns of 5% to 10% p.a., depending on the
risk profile of their loan selection.
Source: P2P Global Investments PLC

SME loans
The platforms operating in this asset class focus on connecting institutional and retail
capital to SMEs requiring debt finance. Generally, SMEs that are accepted as borrower
members are established businesses.
As at February 2015, the outstanding balance of loans to SMEs in the UK was 168bn
(Source: Bank of England). The emergence of P2P SME loan platforms in the UK, such
as Funding Circle (UK), allows creditworthy SMEs to borrow money online at interest
rates as low as 6% p.a. For lenders, the Funding Circle (UK) SME platform offers the
majority of investors net returns of 3.5% to 9% p.a.
Source: P2P Global Investments PLC

Corporate invoice receivables

Invoice financing has emerged as a lending asset class whereby a platform advances
funds against invoice receivables. This form of financing allows businesses seeking
working capital to get advances on cash due from their customers.
From a borrower members perspective, this form of short-term (typically 30 to 180
days) financing provides for a low cost way for the business to receive capital instead
of an often more restrictive and/or more expensive banking facility. In many cases,
SMEs which sell goods or services to blue chip companies can receive advances
against their invoices via P2P platforms for an annualised discount factor of 8% to 20%
of the face value of the invoice.
Source: P2P Global Investments PLC

Cantor Fitzgerald Europe Research

P2P Global Investments | 16 September 2015

The risks to returns

The risks to returns

P2P loans are generally held to maturity, so the upside is known at the time of
acquisition: at best the lender gets paid the interest due and their principal back. The
downside however depends on a number of factors, as detailed in the table below.
P2P model: main sources of risks to returns

General comments

P2PGI specific comments

RISKS TO INVESTED PORTFOLIO

Defaults/losses
The risk portfolio losses exceed those expected. This can be due to:
factors outside the managers control (i.e. macroeconomic factors,
such as an overall increase in default rates) and/or
credit selection that results in a portfolio that experiences defaults in
excess of the broader market rates
Furthermore, it is difficult to:
establish the reliability of the managers or the markets expected
default rates, given the limited availability of historical data
identify suitable benchmarks for the types of loans the managers
invest in, or even an overall benchmark for the investment universe
Gearing
Gearing plays an important part in enhancing portfolio returns and
achieving attractive returns for shareholders. However, should a certain
rate of portfolio return not be achieved:
gearing detracts from shareholders returns and magnifies losses
if borrowing covenants are breached the manager may be forced to
sell loans and possibly do so at below market prices
if loans are prepaid, gearing may not be matched by invested assets
Platform going under
As loans are owned by the lenders and not by the platforms, a platform
entering insolvency should not affect these investments. However, as
generally the platforms are also the servicers of the loans, the key here is
to quickly put in place a new loan servicing provider.

Platforms typically use multi-level credit and risk

rating models to assess the creditworthiness of
borrowers.
While some lenders acquire loans in bulk by relying
solely on the platforms credit assesment, P2PGI
has developed its own proprietary credit selection
model, which also uses additional third-party
data, and each loan is individually assessed.

The Company is permitted to gear the portfolio up

to 150% of NAV (60% LTV) on a look-through basis.
The managers make the point the target dividend
can be met without leverage. However, the use of
leverage (target 70-80% if NAV) enables them to
achieve the same returns from a portfolio of higher
quality loans (i.e. with lower expected defaults).

Platform due dilligence is a key area of focus for

P2PGI. Furthermore, P2PGI has in place back-up
servicing agreements.

REINVESTMENT RISK
Most loans have relatively short maturities. Furthermore, they do not have
signficant early redemption penalties or make whole clauses and can be
repaid with little or no notice.
Ability to secure future capacity
While the amount of money borrowed via platforms is growing rapidly,
the competition among platforms and lenders is also increasing.
Being able to secure long-term capacity deals with platforms is
therefore essential to mitigating reinvestment risk.

The maximum permitted term of any of the P2PGI

underlying loans is five years.

P2PGI has to date sucessfully deployed, within

anticipated
timeframes,
nearly
500m.
Furthermore, it has secured valuable capacity
agreements and has in place most favoured
nation agreements with selected platforms.

Available rates/credits no longer attractive

This is dependent mostly on market conditions, although the
managers ability to secure/structure attractive deals is also important
Ability to secure future borrowings at economical rates
This is dependent mostly on market conditions, although the We understand from the Company that the cost of
managers ability to secure/structure attractive deals is also important borrowing secured by P2P loans is falling, as banks
are becoming more comfortable with the asset
class. It is also worth noting that the managers
pioneered the first P2P securitisation in 2013.
Regulation
Changes in regulation may impact the growth and dynamics of the
sector and the returns that can be achieved

Source: Cantor Fitzgerald Europe Investment Companies Research

Cantor Fitzgerald Europe Research

Portfolio and performance

P2P Global Investments | 16 September 2015

Portfolio and performance

Portfolio
AS of 30 June 2015 the ordinary share portfolio was fully invested in c.180,000 loans,
originated via 15 platforms, with a weighted average coupon of 11%. We understand
gearing stood at around 30%-40% of NAV.
P2P Ordinary Share portfolio breakdown (467.6m NAV), 31 July 2015
US SME
4.8%

P2P C Share portfolio breakdown (395.6m NAV), 31 July 2015

Asia Consumer
1.4%
Equity
2.8%

Cash and
Money Market
100.0%

Cash & Money

Market
5.8%

US Consumer
59.0%

European
Consumer
15.6%
European SME
10.5%
Source: P2P Global Investments PLC

Source: P2P Global Investments PLC

P2P top ten positions (as per C share prospectus published on 30 June 2015)

1
2
3
4
5
6
7
8
9
10

Investment

Country

Principal activity

Eaglewood SPV1 LP
P2PCL
Ratesetter Equity
Zopa Equity
Direct Money Equity
Lending Works Equity
SME Loan
SME Loan
SME Loan
SME Loan

US
UK
UK
UK
UK
UK
UK
UK
UK
UK

Alternative finance SPV (holds tens of thousands of loans)

Alternative finance SPV
P2P Lending Platform
P2P Lending Platform
P2P Lending Platform
P2P Lending Platform
Consumer Services
Healthcare
Manufacturing and Engineering
Leisure & Hospitality

Total

Value ()

% NAV

302,369,530
8,232,118
2,400,003
2,272,737
1,203,536
958,228
260,420
260,420
257,003
248,141

64.15
1.75
0.51
0.48
0.26
0.20
0.06
0.06
0.06
0.06

318,462,136

68.00

Source: P2P Global Investments PLC

Performance*
P2P NAV total returns (%)

P2P price, NAV, NAV + dividends (p)

Jul Aug Sep Oct Nov Dec YTD ITD

1,200

0.16 0.17 0.22 0.23 0.48 0.54 0.50 2.32

0.54 0.59 0.64 0.41 0.71 0.77 0.50
4.24 6.66

1,150

Jan Feb Mar Apr May Jun

2014
2015

(*past performance is not necessarily an indication of future returns)

NAV + Dividends
Price
NAV

450m C
share raised

1,200

1,150

1,100

1,100

P2P dividends per share (p)

Jan Feb Mar Apr May Jun
2014
2015

Jul Aug Sep Oct Nov Dec YTD ITD

6.0

12.5

16.5 10.5 *

6.0

250m C
share raised

1,050

1,000

1,050

200m IPO proceeds

fully deployed**

1,000

45.5

950
May-14
ITD = inception to date. Inception = 29 May 2014

950
Aug-14

Nov-14

Feb-15

May-15

Aug-15

Source: Bloomberg, P2P Global Investments PLC

*8.5p per share was declared to the original C Shareholders prior to conversion
**The initial IPO proceeds wer fully delpoyed within 8 months, within the 6-9 months targer set at IPO
Source: P2P Global Investments PLC

Cantor Fitzgerald Europe Research

P2P Global Investments | 16 September 2015

Platform agreements

Platform agreements
P2PGI, directly and indirectly, has in place capacity agreements with a number of
platforms. They give the Company the right (but not the obligation) to buy a
pre-determined volume of loans originated by these platforms. These agreements are
valuable, as the reinvestment risk of the asset class is relatively high, given the
relatively short maturities of the underlying loans.
The length of these agreements varies; we understand from the Company they range
from five years to evergreen. They are subject to termination on the occurrence of
certain events, which usually include the event where P2PGI and/or its affiliates do not
invest a minimum amount during a given time period (generally one year).
Descriptions of some of the established platforms in the US, UK and New Zealand through which the Company currently invests

Lending Club (US)

Lending Club is a US-based platform for consumer lending that was established in 2007. It is the largest P2P loan platform globally, in
terms of volume of loan origination, with loan origination over US$9.2bn from launch and current quarterly origination reaching
approximately US$1.6bn (as of March 2015). Lending Club currently offers lender members average net annualised returns of 5.0% to
9.7%, depending on credit grade (after fees and default losses) on their 3 to 5 year fully amortising loans with (across both 3 and 5 year
loans) annualised lifetime default rates of 2% to 14%. (Source: www.lendingclub.com).
Upstart (US)
Launched in April 2012 by ex. Google employees, Upstart offers unsecured loans ranging from $3,000 to $35,000 to consumers,
including those with shorter credit history (thin file applicants) who, based on Upstarts underwriting and risk assessment process,
are able to demonstrate potential for future income earnings based on their education and work experience. Upstart currently offers
lender members average net annualised returns of 5.1% to 8.4% (after fees and default losses), depending on credit grade. (Source:
www.upstart.com).
Prosper (US)
Founded in 2005, Prosper is the second largest consumer platform in the US, with more than two million members and over $3bn in
funded loans. Borrower members list unsecured loan requests between $2,000 and $35,000. The average expected annualised net
yield (after fees) is 6.87%. (Source: www.prosper.com).
Funding Circle (UK)
Launched in 2010, Funding Circle (UK) was the first, and is now the leading, P2P SME platform in the UK and globally in terms of
volume of loan origination. The platform has originated over 682m of loans since inception. The loans have been funded by lenders
including retail lenders, county councils, the Government-backed British Finance Partnership (20m lent from March 2013) and the
Government-backed British Business Bank, who have committed to lend 40m from its 300m investment programme. The platform
operates using a floored auction rate model which has achieved net annualised returns to lenders of 6.6%, since inception, and which
has a current expected lifetime bad debt rate of 4.2%. Funding Circle (UK) currently offers loans with terms up to 5 years to UK-based
established SMEs. (Source: www.fundingcircle.com/uk).
Zopa (UK)
Zopa, founded in 2005, was the first P2P platform worldwide and is currently the largest platform in the UK with over 907m in
origination since inception. Its business focuses on matching high credit quality consumer borrower members in search of 1 to 5 year
term loans with lender members, who can earn a current expected annualised net yield (after fees) of 5.0%. Loans originated through
the platform since 2011 have an historic lifetime overall default loss rate of not more than 0.96%. (Source: www.zopa.com).
RateSetter (UK)
Founded in 2010, the business has emerged as one of the leading UK consumer platforms, having originated over 671m since launch.
The current average expected annualised net yield (after fees) is 5.5% and 6.6% on 3 and 5 year loans respectively. Over the full term,
RateSetter expects the bad debt rate on outstanding loans to be approximately 1.4%. (Source: www.ratesetter.com).
Harmoney (NZ)
Launched in 2014, Harmoney is New Zealands first licensed peer to peer lending platform. Harmoney has originated over NZ$50
million in consumer loans over 8 months and was forecasted to generate annualised returns of 12% on deployed capital. The loans have
been funded by individuals and several major institutional investors. Its business focuses on loans to creditworthy individuals of
NZ$1,000 NZ$35,000 with terms of 36 and 60 months. (Source: www.harmoney.co.nz).

Source: P2P Global Investments PLC

Cantor Fitzgerald Europe Research

Investment management process

P2P Global Investments | 16 September 2015

Investment management process

The Investment Managers investment strategy and risk management policy can be
broadly split into three stages, as follows.

1) Platform due diligence and on boarding

Prior to investing in any credit assets through a platform, the Investment Manager will
engage in a thorough due diligence process to ensure that the platform has
appropriate expertise and the necessary operational systems in place. A commercial
and financial assessment will be undertaken in order to examine:
1.
2.
3.
4.

the platforms ability to do business in its markets for the foreseeable future;
the soundness of its financial planning;
its ability to manage regulatory and business risks; and
the robustness of its outsourcing to third party agencies to continue servicing loans
in the event of that platforms insolvency.

The Investment Manager automates, as far as possible, all information gathering,

documentation and reconciliation processes, and has in place direct access to the
platforms data.

2) Capital allocation and asset selection

The Investment Manager considers, across a broad spectrum of platforms, the relative
merits of different asset classes, taking into account factors such as gross interest
rates, expected default loss rates, market capacity and leverage considerations.
Expected default loss rates are derived from the Investment Managers analysis of
historical payment data, where available.
The Investment Manager allocates assets using its proprietary asset selection
models which use platform data but also third-party data for credit analytics. These
models seek to identify individual assets within each platform credit grade with
superior risk/reward ratios, by analysing parameters such as default risk, duration,
geography and asset class at the marketplace and aggregate portfolio level. The
Investment Manager back-tests the performance of historical loan parameters to
assess their outperformance against passive investing.

3) Portfolio and risk monitoring

The

Investment

Manager

has

undertaken

substantial research into historical loss rates

The Investment Manager has in place risk management processes designed to limit the
impact of unforeseen shocks and maintain the required diversification (see page 11).

across each of the platforms via which it invests

in order to extrapolate forecasted default losses.
In its analysis, the Investment Manager considers
fully matured loans and loans that have sufficient
performance history to extrapolate expected
lifetime of loan defaults based on default curves

These portfolio monitoring tools also allow the Investment Manager to drill down into
sub-categories and conduct scenario analysis of future positions. For assets that have
attained around 30% of their scheduled maturity, the Investment Manager regularly
compares realised static pool losses against initial expected losses. The Investment
Manager also regularly monitors the correlation between default loss rates from
different asset classes.

Technology, infrastructure, operations

Additionally, the Investment Manager places great emphasis on the robustness of its
operations and infrastructure. Given the vast amounts of loans being processed
(currently there are c.180,000 loans in the portfolio and we understand that millions of
loans are being assessed) the Investment Manager has in place technology designed
for straight-through loan processing, with front-office and middle-office processes
automated to manage scale.

Cantor Fitzgerald Europe Research

P2P Global Investments | 16 September 2015

The Investment Manager

The Investment Manager

The Company's investment manager is Eaglewood Europe LLP, a London based asset
manager specialising in the alternative credit space. Eaglewood Europe was incubated
out of the London-based investment bank Liberum Capital before being acquired by
Marshall Wace in 2013. In 2014 it merged with Eaglewood Capital Management LLC, a
SEC-registered investment advisor based in New York, founded in 2011, to form MW
Eaglewood.
The Investment Manager has delegated certain of its responsibilities and functions,
including its discretionary management of the Company's portfolio to Eaglewood
Capital. Eaglewood Capital has been at the forefront of developments in the emerging
online direct lending space, including the first securitisation of P2P consumer loans in
October 2013.
The team at Eaglewood Capital is comprised of 24 individuals, 13 based in London and
11 based in New York.
The team includes seven credit professionals, a risk officer, a COO, two legal
professionals, four IT professionals, one accounting professional and two operations
executives.

Key individuals
Simon Champ, Chief Executive Officer, Eaglewood Europe
Simon Champ has nineteen years experience in banking as a Director of Equity Sales
and Equity Capital Markets at Dresdner Kleinwort, JP Morgan Cazenove and most
recently Liberum. As a founder and former board Director of Liberum, he was part of a
number of innovative transactions in the equity space and has advised many new
technology companies in equity and debt raisings. He has been involved in the UK P2P
industry as both an investor and advisor and has built extensive relationships with
many of the leading P2P platforms. He has been seconded from Eaglewood Europe to
the Investment Manager.
Abror Ismailov, Portfolio Manager, Eaglewood Europe
Abror Ismailov is a portfolio manager with responsibility for managing the Companys
assets. Prior to joining the Investment Manager, he worked as a Director within
Lazards Structured Credit Advisory group, was a Senior Portfolio Manager for Union
Investment in Frankfurt, a Portfolio Manager at Cambridge Place Investment
Management and held various positions within the Global Portfolio Management
Group at Deutsche Bank. In these roles he has been responsible for managing over
3.5bn of funds invested in structured credit, real estate and private equity
investments. He holds Masters degrees in Business and Finance from the University of
Hamburg, University of Nantes and University of Valencia and is a CFA charterholder.
Steven Lee, Chief Investment Officer, Eaglewood Capital
Steven Lee is a portfolio manager with responsibility for managing the Company's
assets. Prior to joining Eaglewood, he worked for Cambridge Place Investment
Management, a London-based hedge fund, as the Global Head of Credit Research.
Prior to Cambridge Place Investment Management, he worked as a Director for UBS in
Zrich in cash and collateral trading and as a research analyst at Fidelity Investments
focused on ABS and corporate debt. He has also worked for Prudential and Coopers &
Lybrand. He has over 20 years of fixed income investment experience and has
invested across several ABS sectors, both in the United States and in Europe. He
graduated with an M.B.A. from the University of Chicago, a BS from Binghamton
University and is a CFA charterholder.

Cantor Fitzgerald Europe Research

The Board of Directors

P2P Global Investments | 16 September 2015

The Board of Directors

The Companys Board is comprised of three non-executive directors, all of whom are
independent of the Investment Manager.

Stuart Cruickshank (Chairman) (aged 60)

Stuart Cruickshank is an established financial professional with public company and
Whitehall experience. He has worked for large, blue chip organisations such as Diageo,
Whitbread and Kingfisher and he has also spent a number of years in SMEs. His sector
exposure is wide and includes financial services, fast moving consumer goods,
business to business, mass retailing, technology and entertainment. He has experience
of investor relations on both sides of the Atlantic and in Continental Europe. His last
executive role was Director General and Chief Finance Officer of HM Revenue &
Customs. He has a number of non-executive roles. He chairs the Audit Committee and
is the Vice Chairman of Cambridge Building Society and is the Chair for the BMA Audit
Committee. He took InternetQ Plc through the AIM admission process and chaired the
organisation through the early stages of its life as a public company. He has previously
held non-executive positions in the healthcare sector as well as with the technology
company, Psion Plc.

Simon King (aged 49)

Simon King has many years of experience of managing investment companies and
trusts. He joined Gartmore Fund Managers in 1994, initially working on the UK Smaller
Companies team where he took charge of the NatWest Smaller Companies Exempt
fund, the UK Emerging Companies Strategy fund and a selection of specialist pension
fund products. In 2000 he became a senior investment manager on Gartmore's UK
Equities team. He managed and co-managed a series of funds including the Gartmore
UK Focus Fund, the Alphagen Avior Hedge Fund and the Alphagen Octanis Hedge
Fund. From 2009 to 2012, Simon worked at Premier Asset Management where he
managed UK unit trusts. He is currently a part time Senior Fund Manager at Numis
Asset Management. He holds a degree in Economics from Surrey University. He brings
to the Board a wealth of experience in the areas of fund management, regulation and
adherence to investment mandates.

Michael Cassidy (aged 67)

Michael Cassidy has had over 40 years experience as a qualified lawyer, principally
engaged in investment work for a large pension fund and most recently as a
consultant to DLA Piper. He had a career in City Local Government, with senior roles
at Guildhall including Leader of the Council and Planning Chairman, and also the
Museum of London and Property Investment Board. He has also been non-executive
director of British Land and is currently senior non-executive director at Crossrail and
non-executive director of UBS Ltd. He is also the Chairman of Ebbsfleet Urban
Development Corporation and was awarded CBE in 2004 for services to the City of
London.

Cantor Fitzgerald Europe Research

P2P Global Investments | 16 September 2015

About the Company

About the Company

P2P Global Investments PLC is the first UK listed company dedicated to investing in
credit assets originated via online lending platforms globally. The Company is UKdomiciled and is subject to Investment Trust tax treatment.
The Company was launched on the Main Market of the London Stock Exchange on 29
May 2014 and to date has raised over 920m via multiple issues.
P2PGI equity raisings, 31 August 2015
Date

m raised

Issue type

Notes

29 May 2014
27 Jan 2015
18 Jun 2015
24 Jul 2015

200.0
250.0
21.5
450.0

Initial fund raise

C Share
Tap issue
C share

IPO price 1,000p

Converted* on 22 July 2015
Issued at 1,075p
Currently trading as a C share (P2P2 LN)

Total

921.5

*C Shares get converted to ordinary shares once over 90% of proceeds have been invested
Source: P2P Global Investments PLC

Investment objective
The Companys investment objective is to provide Shareholders with an attractive
level of dividend income and capital growth through exposure to investments in
alternative finance and related instruments.

Target returns
The Company does not have a defined total return target, but will typically seek to
invest in Credit Assets with targeted net annualised returns of 5% to 15%. These are
unlevered returns at the individual asset level, before expected defaults, costs and the
impact of leverage.

Target dividend
The Company targets an annualised dividend yield of at least 6% to 8% of the issue
price, i.e. 60p 80p per share. Dividends are paid quarterly.

Investment Policy
Dividend and capital growth
Consumer loans, SME loans, trade receivables

The Company invests in consumer loans, SME loans, corporate loans, and advances
and loans against corporate trade receivables and other assets, which have been
originated via platforms.

originated via platforms

Up to 10% in platform equity stakes

The Company may also invest in facilities, securities or other interests backed by a
portfolio of any of the aforementioned loans, assets or receivables.

Primarily US and Europe, but global remit

Platforms means origination platforms that allow non-bank capital to:

a) lend or advance capital to consumers, SME borrowers or corporate borrowers;
and/or
b) advance capital against corporate trade receivables
The Company may also invest, in aggregate, up to 10% of Gross Assets (at the time of
investment) in the listed or unlisted equity and equity-linked securities issued by
platforms.

10

Cantor Fitzgerald Europe Research

About the Company

P2P Global Investments | 16 September 2015

Investment restrictions
Maximum 33% of gross assets may be invested via any single platform. This may
be increased to 66%, provided that this amount is not greater than 25% of the total
loans originated by that platform in the previous calendar year.
Maximum 20% of gross assets, at the time of investment, may be invested in any
single fund investing in credit assets. A maximum of 60%, in aggregate, at the time
of investment, may be invested in such funds.
Maximum 10% of gross assets may be invested, at the time of investment, in other
listed closed-ended investment funds, whether managed by the Investment
Manager or not. However, this restriction shall not apply to funds which themselves
have stated investment policies to invest no more than 15% of their gross assets in
other listed closed-ended investment funds.
Maximum 10% of gross assets, at the time of investment, may be invested in the listed
or unlisted securities issued by one or more platforms. This restriction shall not
apply to any consideration paid by the Company for the issue to it of any convertible
securities by a platform. However, it will apply to any consideration payable by the
Company at the time of exercise of any such convertible securities or any warrants
issued by a platform. The Company does not currently intend to invest more than 5%
of gross assets in securities issued by platforms, however, the 10% limit gives the
Company room to crystallise its investment in such options and warrants.
The following will apply, at the time of investment by the Company, to credit assets
acquired by the Company directly and on a look-through basis, as a percentage of
gross assets:

Maximum 0.25% in any single consumer loan

Maximum 5% in any single SME loan
Maximum 5% in any single advance or loan against a trade receivable asset
Maximum 5% in any single corporate loan
Maximum 20% in any single facility, security or other interest backed by a portfolio
of loans, assets or receivables (excluding any borrowing ringfenced within any SPV
which would be without recourse to the Company)
Maximum 50% will be invested in SME credit assets
Maximum 50% will be invested in trade receivable assets
Minimum 10% will be invested in consumer credit assets
Minimum 10% will be invested in Europe and minimum 10% in the United States

The expected average life of any single loan will not exceed 5 years. Expected
Average Life means the expected weighted average time for the receipt of principal
payments.
Any single trade receivable asset will be for a term of no longer than 180 days.
The Company will not invest in CDOs.
The Company may invest in cash, cash equivalents and fixed income instruments for
cash management purposes and with a view to enhancing returns to Shareholders or
mitigating credit exposure. However, the Company will only invest in fixed income
instruments of investment grade.

Cantor Fitzgerald Europe Research

11

P2P Global Investments | 16 September 2015

About the Company

The Investment Manager

The Company's investment manager is Eaglewood Europe LLP, a London based asset
manager specialising in the alternative credit space and a subsidiary of Marshall Wace
LLP. For more details and key individuals see page 8.

Investment strategy and process

See page 7.

Fees
1% of NAV annual management fee
A management fee is payable monthly in arrears at a rate of 1/12 of 1.0% per month
of Net Asset Value.
Performance fee of 15% of NAV gains
The Investment Manager is entitled to a performance fee equal to 15% of gains in the
Adjusted Net Asset Value, calculated on a yearly basis and subject to a High Water
Mark.
Adjusted Net Value means the Net Asset Value adjusted:

for any increases or decreases in NAV arising from issues or repurchases of shares
by adding back the aggregate amount of any dividends or distributions
by adding back any accrued performance fees
to ensure no double charging of fees (see paragraph below).

No double charging of fees

The Investment Manager does not charge a management fee or performance fee
twice. The value of investments where a fee is charged by the Investment Manager or
any of its affiliates is therefore excluded from the NAV calculation for the purposes of
determining the fee payable.
Loan administration fees (0.025% of NAV)
The Company has appointed Deutsche Bank AG, London Branch as Loan
Administrator to provide loan administration services. The Loan Administrator is
entitled to receive a fee of 0.025% of Net Asset Value, subject to a minimum monthly
fee of 2,000 (exclusive of VAT), for the provision of loan administration services.

Borrowing policy
Borrowings may be employed at the level of the Company and at the level of any
investee entity. The aggregate leverage, on a look-through basis, is limited to 1.5
times Net Asset Value.
The Company may seek to securitise portfolios of Credit Assets and may establish one
or more SPVs in connection with any such securitisation.
We understand that leverage costs are falling compared to early facilities, as banks
become more comfortable with the asset class.
The Manager makes the point the target dividend can be met without leverage.
However, the use of leverage (target is 70%-80% of NAV) enables the Manager to
achieve the same returns from a portfolio of higher quality loans (i.e. with lower
expected defaults).

12

Cantor Fitzgerald Europe Research

About the Company

P2P Global Investments | 16 September 2015

Hedging policy
The Company intends to hedge currency exposure between Sterling and any other
currency in which the Companys assets may be denominated, including US Dollars
and Euros.
The Company does not intend to hedge interest rate risk on a regular basis. However,
where it enters floating-rate liabilities against fixed-rate loans, it may at its sole
discretion seek to hedge out the interest rate exposure, taking into consideration
amongst other things the cost of hedging and the general interest rate environment.

Net Asset Value

The Net Asset Value (cum-income and ex. income) is calculated by the Administrator
on the basis of information provided by the Investment Manager and / or the External
Valuer on a monthly basis.
Loans valuation
At acquisition, loans are valued at the initial advance amount inclusive of any fees paid
to the platforms or, if acquired from a third party, at the purchase consideration paid.
Thereafter, all loans are valued at this amount less cumulative amortisation calculated
using the Effective Interest Rate (EIR) method. The EIR method spreads the
expected net income from a loan over its expected life. The EIR is that rate of interest
which, at inception, exactly discounts the future cash payments and receipts from the
loan to the initial carrying amount.
Adjustment for impairments
Loans advanced will be assessed by the Investment Manager for indications of
impairment during and at the end of each reporting period. Evidence of impairment
includes:
1. significant financial difficulty of the platform;
2. breach of contract, such as default or delinquency in interest or principal payments;
3. probability that a borrower will enter bankruptcy or financial reorganisation.
In the event of payment arrears, the outstanding amount of the loan is adjusted as
follows:
Payment late by

Impairment applied

Up to 15 days
15 30 days
30 60 days
60 90 days
Over 90 days

0%
40%
60%
80%
100%

Source: P2P Global Investments PLC

Loans advanced will be further assessed for impairment on a collective basis even
if they are assessed not to be impaired individually. Observable changes in economic
conditions or changes in forecasted default or delinquency in interest or principal
payments based on the Investment Managers past experience will be applied.
Fair value accounting for liquid credit assets
In the event that a liquid secondary market or exchange in credit assets is established
and the Company elects to buy and sell credit assets via this exchange, the Company
may adopt a fair value accounting methodology.
Unlisted equity valuation
Investments in unlisted equity will be valued at costs less accumulated impairment
loss as determined by the Investment Manager.

Cantor Fitzgerald Europe Research

13

P2P Global Investments | 16 September 2015

About the Company

Dividend policy
The Company intends to distribute at least 85% of its distributable income earned in
each financial year by way of dividends.
The Company intends to pay dividends on a quarterly basis with dividends declared in
December, March, June and September and paid in February, May, August and
November in each year.
The Company targets an annualised dividend yield of at least 6% to 8% of issue price
(i.e. 60p to 80p per share).
It is the intention of the Board to move towards a policy of balancing the quarterly
dividend payments as soon as the revenue reserve position of the Company permits
this approach.
Dividend history
Dividend payments (pence per P2P share)
Financial
year
2014
2015

In respect of

Amount

Declared

Xd Date

Pay date

IPO to 31 Sep
Q4
Q1
31 Mar to 31 May

6.0
12.5
16.5
10.5

18 Nov 2014
20 Feb 2015
19 May 2015
30 Jun 2015

27 Nov 2014
5 Mar 2015
28 May 2015
9 Jul 2015

30 Dec 2014
2 Apr 2015
26 Jun 2015
7 Aug 2015

Source: P2P Global Investments PLC

Company life & continuation votes

The Company has no fixed life; however, an ordinary resolution for the continuation of
the Company will be proposed at the annual general meeting of the Company to be
held in 2019 and, if passed, every five years thereafter.

Significant shareholders
P2P large shareholders (as at 14 September 2015)
Shareholder
1
2
3
4
5
6
7
8
9
10

Woodford Investment Management

Invesco Ltd
Thesis Investment Management
AXA
Ruffer Investment Management
Artermis Investment Management
JO Hambro Capital
M&G Investment Management
Aviva Investors
Legal & General Investment Management

13.9
8.7
3.4
3.2
2.3
2.2
2.1
2.1
1.4
1.2

Total

40.5

Source: Bloomberg

Important dates

14

Financial year end:

Dividends declared:
Dividends xd dates:
Dividends pay dates:
Continuation votes:

Cantor Fitzgerald Europe Research

31 December
Dec, March, June, Sept
Jan, April, July, Oct
Feb, May, Aug, Nov
2019 AGM and every five years thereafter

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