Under the new model, institutional investors will access the original P2P product, now at a minimum investment of $10 million, with SocietyOne aiming to allow exposure to a large enough pool of loans to achieve adequate diversification and risk for the desired return.
Meanwhile, individuals will be offered the Personal Loans Unit Trust, a new income-managed fund in which investment can be as low as $50,000, and will provide a smoothed 6 per cent per annum return, paid monthly and supported by a reserving mechanism, SocietyOne said.
The new way of lending is targeted towars retirees and savers in a low interest rate environment.
Chief executive Mark Jones called the new model the next evolution of traditional P2P or marketplace lending.
“Being the first P2P lender in Australia, we’ve had many years to build a thorough understanding of our different investor categories’ needs, and hone our investment products accordingly,” Mr Jones said.
“We’re also conscious of changing economic conditions, such as the all-time-low interest rates pushing a growing number of retirees and savers to invest in more risky products to achieve acceptable returns. We wanted to provide a more diversified, higher return and income-producing alternative.”
The Reserve Bank set the cash rate at its current historic low of 1 per cent in July, after two consecutive rate cuts.
As a result, average fixed-term deposit yields are sitting at around 2 per cent and according to futures markets, are likely to drop by another 0.25 per cent within six months.
“Long-term falling yields are forcing the growing pool of retiree savings into higher risk products such as ‘high income or defensive equity portfolios’ more suited to institutional and professional investors,” SocietyOne noted.
“The significant capital-at-risk nature of these asset classes is often glossed over.”
In the event of a further economic downturn, such as a significant global equities correction, these higher risk options mean Australians who are no longer earning and who require income-based investments could lose a substantial proportion of their savings, according to SocietyOne chief investment officer, John Cummins.
“Current and future market yields are a reflection of a slowing global and local economy. Any further downturn in global growth and trade should lead prudent investors to choose quality yield-based assets and not higher risk investments,” said Mr Cummins.
The Personal Loans Unit Trust is open to wholesale and professional investors. SocietyOne signalled it intends to open the fund to retail investors in the future.
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
Sarah has a dual bachelor's degree in science and journalism from the University of Queensland.