Investors Want “Diversification” In Loans, But Are They Getting It During Crisis?

With Silicon Valley increasingly knocking on the door of Wall Street, developing innovative products using their technology and brand reach to take market share from banks, the business of packaging and selling loan products is, likewise, changing. Combining technology with a low-yield environment is “marketplace loan products” (MPLs). These investments in the debt of consumers are growing, with one of the primary performance drivers behind the decision being “diversification.” But are investors getting diversification during a market downturn? The study’s numbers suggest concern.

Both retail and institutional investors are increasingly turning to peer-to-peer marketplace loans. An industry that mostly didn’t...