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Page 1: Talk Bocconi

Università Bocconi28 November 2016

Roberto CondulmariEdoardo Matarrese

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2www.P2PLendingItalia.com

WHY SHOULD TRADITIONAL ASSET

MANAGERS BE INTERESTED IN P2P LENDING ?

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THE T.I.N.A. GAME

3www.P2PLendingItalia.com

Source:ExaneBNPParibas estimates basedonBloomberg dataasof24Nov2016,P2PLendingItalia.com

«T.I.N.A. – There Is No Alternative – seems to be the investment strategy du jour»Santiago López Díaz – Exane BNP Paribas

DURATION OF NEGATIVE YIELDING BONDS (NUMBERS OF YEARS) - RED (NEGATIVE) / GREEN (POSITIVE)

BondDuration (#ofyears)

Country 1 2 3 4 5 6 7 8 9 10 15 30

Switzerland

Japan

Germany

Netherlands

Austria

Denmark

Belgium

France

Sweden

Finland

Spain

Italy

UK

USA

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CBs HAVE DIVIDED INVESTORS...

4www.P2PLendingItalia.com

Source:Epsilon Theory– W.BenHunt,Ph.D.,CompassAM

“There are ZERO income seekers holding negative rate bonds”W. Ben Hunt, PH.D. – Salient Partners

ü Short-term owners

RETURN SEEKERS

ü Sticky owners

INCOME SEEKERS

Central Banks’ balance sheet expansion and imposition of negative rates are great if you are a return seeker; that’s terrible, however, if you are an investor looking for income from your portfolio...

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ALTERNATIVE CREDIT – A NEW ASSET CLASS (i)

5www.P2PLendingItalia.com

Source:ExaneBNPParibas estimates Sept2016,DeutscheBundesbank, P2PLendingItalia.com

“If credit were like any other good, one would expect that if prices increase in line with risk there should still be actors willing to provide it. However [...] even banks with a clear legal mandate to accept

all customers [...] are not willing to provide credit to this slice of the market.”

Deutsche Bundesbank – Discussion Paper: “How does P2P Lending fit into the consumer credit market?”

Born in the A.C. – After Crisis (i.e. post 2008) – era from the gradual, unstoppable, fragmentation/dissolution of traditional banking models...

“HOW MUCH CAPITAL IS ENOUGH?” - TOTAL ASSETS / TOTAL EQUITY OF SPANISH BANKS:

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ALTERNATIVE CREDIT – A NEW ASSET CLASS (ii)

6www.P2PLendingItalia.com

Current relative advantages:

i. Not distorted

ii. High premium vs Government bond yields

iii. Can be securitised

iv. Generally (still) not crowded

v. Can be supported by collateral guarantee

… And disadvantages:

i. Illiquid / less liquid

ii. Requires a lot of bottom up analysis effort

ALTERNATIVECREDIT

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WHERE SHOULD WE FOCUS?

7www.P2PLendingItalia.com

i. Invoice purchasingii. Personal loansiii. Collateralized direct loansiv. SME loansv. Etc…

DIRECTLOANS

ü STRUCTURAL

ü GLOBAL

ü SEGMENTED

Page 8: Talk Bocconi

GLOBAL PICTURE - VOLUMES

8www.P2PLendingItalia.com

Source:University ofCambridge,KPMG:The2ndEuropean AlternativeFinance IndustryReport - Sep.2016;P2PLendingItalica.com

1,13 2,83 5,433,249,65

33,58

4,13

20,29

94,61

0

20

40

60

80

100

2013 2014 2015

ONLINE ALTERNATIVE FINANCE VOLUMES 2013-2015 (€ BN)

Europe (inc. UK) Americas (inc. US) Asia-Pacific (inc. China)

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EUROPE – VOLUMES

9www.P2PLendingItalia.com

Source:University ofCambridge,KPMG:The2ndEuropean AlternativeFinance IndustryReport - Sep.2016;P2PLendingItalica.com

4348

319 24950 32

0

1000

2000

3000

4000

5000

UK France Germany Spain Italy

ONLINE ALTERNATIVE FINANCE VOLUME BY COUNTRY 2015 (€MLN)

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THE UK ECOSYSTEM

10www.P2PLendingItalia.com

ONLINE LENDING ECOSYSTEM

• Consumer Lending

• Business Lending

• Secured Lending

• Invoice Financing

Source:OrchardPlatform

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INSTITUTIONAL MONEY vs RETAIL MONEY

11www.P2PLendingItalia.com

Source:Funding Circle,AltFiData,P2PLendingItalica.com

WHAT HAPPENS WHEN A SINGLE INVESTOR WANTS TO DEPLOY €100M THROUGH A PLATFORM ?

… Originally it was “Peer-to-Peer lending” (Bob lending to Peter), but importantly with institutional investors looking for yields, major P2P platforms morphed into “Marketplaces”. MPLs will become most likely a replica of the traditional stock exchange model for this new asset class.

…Like in the stock exchange, the vast majority of volumes are deployed by institutions. The US is already clearly evolving in this direction, with 80%+ of lending volumes now coming from institutions:

0%10%20%30%40%50%60%70%80%90%

100%

US Market UK (Funding Circle)

Retail Institutional

80%+ 50%+

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PER CAPITA VOLUMES… ITALY vs EUROPE

12www.P2PLendingItalia.com

Source:University ofCambridge,KPMG:The2ndEuropean AlternativeFinance IndustryReport - Sep.2016;P2PLendingItalica.com

65,9

4,8 3,1 1,1 0,50

10

20

30

40

50

60

70

80

UK France Germany Spain Italy

MARKET VOLUME PER CAPITA BY COUNTRY 2015 (€)

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THE ITALIAN ECOSYSTEM

13www.P2PLendingItalia.com

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OUR VIEW...

14www.P2PLendingItalia.com

ü ONLINE DIRECT LENDING IS A GLOBAL PHENOMENON

ü TRENDS ARE POWERFUL ... IN SPITE OF POSSIBLE STOPs AND GOs

ü UK AND US ARE MUCH AHEAD: IT SEEMS AS IF THEY ARE IN A TIME MACHINE PROJECTING THEM 5–10

YEARS IN THE FUTURE vs EUROPE

ü WE EXPECT CONTINUED EVIDENCE OF ASSET MANAGERS MOVING INTO THE ASSET CLASS

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«PRESTARE INFORMATI»

15www.P2PLendingItalia.com

InApril2016welaunchedP2PLendingItalia.com...

...ThroughwhichwemonitortheentireP2PsectorinItalyandshareourviewsontheassetclass

Feelfree toregisteratwww.P2PLendingItalia.com tojoinourpassionateinvestorcommunity!

«LaprimapiattaformadigitaleinlinguaitalianadedicataesclusivamentealP2PLending»

Page 16: Talk Bocconi

[email protected] [email protected]

Roberto Condulmari Edoardo Matarrese