Bristow: Secondary markets are “dangerous”
CrowdProperty’s chief executive has said that access to secondary markets is not a major selling point to peer-to-peer investors, and may even be “dangerous”.
Mike Bristow (pictured) said that the P2P development lending platform learned through its own investor research that asking for secondary market access is “quite low down” on investors’ list of priorities. He added that the presence of a secondary marketplace could actually harm investors by giving them a false sense of liquidity.
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“Bigger picture, secondary markets are dangerous,” Bristow said. “This is why we will not have a secondary market.
“The presence of a secondary market doesn’t mean liquidity. There are so many challenges around availability and pricing, for instance.”
He noted that investors who buy property loans on a secondary market can miss some of the details of the deal, creating “information asymmetry.”
“These are real problems with secondary markets,” Bristow said. “So this is a dynamite area.”
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Rather than relying on a secondary market for liquidity, Bristow said that his investors are encouraged to diversify their investments across several different loans.
“People know and we explained very clearly that they will get paid back at the end of that project,” he added.
“Good practice is to diversify. And that is the core offering of CrowdProperty.”
Last month, CrowdProperty passed £400m in facilities agreed. The property lender has funded more than 3,000 homes to date, for £713m worth of properties.
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