RiverNorth is out with an encouraging note on its fund that invests in marketplace lending platform loans. As of the end of July 2017, RiverNorth’s portfolio consisted of 10,173 loans, with an average loan size of $10,176. The RiverNorth Marketplace Lending (NASDAQ:RMPLX) is designed to provide a high degree of granularity and diversification, and holds a duration of 1.5 with a weighted average FICO score of 708 on the consumer portion of the portfolio. Consumer loans represent a 76% allocation as of July. The Fund’s “subsidized and unsubsidized SEC” net yield currently stands at 11.02% and 9.27%, respectively.
RiverNorth explained that investors are continuing to become more comfortable with the online lending asset class. This increasing awareness is expected to fuel further growth. RiverNorth pointed to two recent events in the MPL sector:
- Prosper recently priced its second securitization deal of 2017, which came with tighter pricing across each of the respective tranches compared to the last Prosper securitization in May.
- Lending Club Q2 results highlighted that banks participated in 44% of total quarterly originations on the back of 40% of originations during Q1.
RiverNorth says the securitization market continues to mature and solidify as institutional investors return to he market.
“… further growth and tighter pricing in the asset-backed security (ABS) market, higher institutional demand for the whole loans, rating agencies gaining comfort as evidenced by the recent securitization deals, etc – in our view suggests a further “institutionalization” of the asset class.”
RiverNorth believes their fund provides a very attractive income opportunity on a risk-return basis comparing to the JPM US High Yield Index that is currently hovering around 6%.
“It is our view that the Fund’s portfolio, which exhibits a significantly wider spread and lower duration profile, offers a compelling opportunity for income-oriented investors, especially considering the significantly lower volatility and low correlation of the asset class. Furthermore, we continue to believe that owning the whole loans themselves provides superior relative value compared to pricing seen in recent marketplace lending ABS deals,” stated RiverNorth.
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