Octopus Investments, the firm behind Dragonfly Property Finance, is looking to shake up the peer-to-peer lending world with a new online platform.
The aim of the new product – Octopus Choice – is to offer investors a lower-risk alternative to the current stable of peer-to-peer property lenders.
The Dragonfly team will do the lending for the new platform, which Mark Posniak, Dragonfly’s managing director, said meant investors would benefit from its “established deal flow and track record”. Less than 0.1% of the £1.9bn the firm has lent since its launch in 2007 has gone unrecovered, he said.
Borrowers will continue to lend from Dragonfly as normal so effectively Octopus Choice will operate as another source of funds for the lender.
For Octopus Choice, Dragonfly will lend only on standing residential properties, offering bridging, buy-to-let and bridge-to-let loans of up to 70% loan-to-value.
There will be no development or commercial loans on the platform.
Rather than inviting investors to back individual loans, their money will be spread across the platform and Octopus will co-invest in all deals. Furthermore, if there are any losses, Octopus will lose its investment first.
“Not only does this show you just how confident we are in the quality of the underlying loans – it also provides investors with an extra layer of protection,” said Simon Rogerson, chief executive of Octopus Investments.
“We want to put our money where our mouth is.”
Posniak added: “Not only is Octopus investing in every deal, but 90% of my team is also investing in the platform, including me.”
Retail investors will be able to invest through Octopus Choice directly, but the main target audience will be independent financial advisers, who have been reluctant to invest their clients’ money in peer-to-peer platforms so far due to the percieved risks and limited track record of some of the lenders.
Offering returns of 5%-6%, Octopus’s pitch to advisers is that the new product offers investors a middle ground between the risks of stock market investing and savings that are earning little interest in a bank or building society.
Octopus has launched a public phase of testing of the new platform before rolling out a full version in due course.