Aviva France, together with two partners, alternative asset management firm Eiffel Investment Group and insurer AG2R La Mondiale, is launching an investment fund called “Prêtons Ensemble” (Lending together) dedicated to financing loans to small and medium-size enterprises (SMEs) provided through crowdlending platforms.
Starting with an initial endowment of €50 million from Aviva France and €20 million from AG2R La Mondiale, the fund is expected to quickly grow to €100 million by rallying other institutional investors around the project.
Aviva France is the French subsidiary of the Aviva Group, the fourth largest European Insurer by assets under management, which provides long-term saving products as well as life, general and health insurance to businesses and individuals.
We spoke to Philippe Taffin, Chief Investment Officer at Aviva France, about the “Prêtons Ensemble” fund and how crowdlending fits in with the overall strategy of Aviva France.
Therese Torris: What is the objective of the “Prêtons Ensemble” and how will it work?
Philippe Taffin: Our objective is to quickly grow the fund to €100 million, which is a significant amount in view of the financing needs of French SMEs. We are delighted that insurance company AG2R La Mondiale joined us as a co-investor in the fund for €20 million, and we look forward to welcoming more proprietary and mutual insurance companies.
The goal is to invest in the French real economy by financing SME loans granted through regulated crowdfunding platforms. Our partner Eiffel Investment Group is a specialist with more than eight years of experience in investing on crowdlending platforms, notably in the more advanced UK and US markets. Eiffel Investment will be in charge of the due diligence on the platforms and their loan portfolios. Currently, they have identified around 100 platforms and have made contact with 50 of them. Eventually, in five years from now, the fund should be invested to 70% in lending to SMEs and minimum to 50% in France. At the onset, we’re starting with a dozen platforms, mostly, but not only from France as the market is still emerging here. The (soon-to-be published) list includes names such as Younited Credit, Finexkap and Lendix.
The fund will be diversified in terms of the platforms’ business model and of the type of credit provided to SMEs. This means that it will include both unsecured and secured loans, short-term invoice financing as well as mid-term loans. On average, the loans are expected to have a maturity of 2.5 years.
We believe that the crowdlending market will consolidate and that we can play a role in supporting the emergence of French crowdfunding market leaders. As an institutional investor, we not only bring to the market more liquidity, we also create more trust ‒ which should attract both more borrowers and retail investors ‒ and, thus, accelerate the growth of the sector.
Therese Torris: What was your reaction to the problems at Lending Club which were made public while you were preparing for the launch of the fund on June 7th 2016?
Philippe Taffin: Our decision was made long before these problems surfaced. Upon hearing about them, we conducted a thorough analysis of their actual causes and impact. We were quite reassured to find out that the scale of the financial issue was small, that it had been fixed, and that a subsequent audit did not uncover any other impropriety.
The issue was a governance issue of the sort that could, unfortunately, arise in any enterprise. But when a company is as much in the limelight as Lending Club was, a tarnish on its reputation creates a lot of damage. The board of Lending Club, therefore, was right in reacting swiftly, even though it took drastic, somewhat brutal measures that have shaken the market. The good news is that the incident has demonstrated that control mechanisms are working.
The crowdlending sector is a young and fast-growing sector, especially in France where it is still emerging. As an institutional investor, we are prepared to support it through the ups and downs that it will inevitably experience along the way.
Therese Torris: Can you explain to us how the crowdlending fund fits into the overall strategy of Aviva France?
Philippe Taffin: The creation of the fund is completely in line with our overall strategy, and this at multiple levels. Let me mention three.
Firstly, it fits with our asset management strategy. It combines our corporate citizenship strategy of investing in the ‘real economy’ with our asset management strategy of diversifying our assets with higher yield investments in asset financing and private corporate debt.
Secondly, it is part of our impact investment strategy. Aviva France is committed to supporting social enterprises and job-creating innovation. This effort spans a variety of initiatives such as a €30 million Aviva Social Investment fund and a philanthropic initiative sponsoring social innovation, called La Fabrique Aviva. We also support 1001Pact, an equity crowdfunding platform dedicated to financing social businesses, by matching €1 to each €1 raised by the platform.
Last, but not least, the fund marries up with our strategy as an insurance company. As an insurer, we want to position ourselves as the go-to financial services provider for entrepreneurs and small business owners, offering them financing, along with life and non-life insurance products.
Therese Torris is an entrepreneur and consultant in eFinance and eCommerce based in Paris. She has covered crowdfunding and P2P lending since the early days when Zopa was created in the United Kingdom. She was a director of research and consulting at Gartner Group Europe, Senior VP at Forrester Research and Content VP at Twenga. She publishes a French personal finance blog, Le Blog Finance Pratique.