UK peer-to-peer lending investments produced annual returns of 7.61 per cent in December, despite the sector seeing its heaviest ever losses that month.
Industry research and ratings firm 4th Way found that total loan write-offs nearly reached €4m in interest and capital in December, but the month still had a positive overall return for investors, as more interest was earned than the total lost.
The impact of the losses mean that full-year returns ticked up from 7.39 per cent to 7.61 per cent in December, after investing costs, instead of hitting the 8.12 per cent annual return that would have arisen had there been no write-offs.
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By comparison, the FTSE 100 index of the London Stock Exchange returned 8.54 per cent last year, after estimated fund costs, fees and expenses.
“Share investors’ returns pipped peer-to-peer lending last year, but, despite now coming out of a tough time for borrowers, the past few years have shown the reliability of this asset class, with solidly positive results,” said Neil Faulkner, co-founder and managing director of 4thWay.
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“Online property lending has stably paid out about six to eight percent per annum – tax-free to IFISA investors – comfortably beating the stock market in the long run and without the massive volatility and emotional roller coaster.
“Indeed, online lending as an asset class has had positive returns every year since it started in 2005, even when considering all closed platforms. 20 years later, when will the wider investing community will catch on?”
Online lending has performed better than inflation in nine out of 10 of the past years, 4th Way research has found, and has earned investors 7.31 per cent per annum annualised, net of investing costs and bad debts.
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