A startup looking to shakeup investing in a $3.8 trillion market just got a big loan from Citi to launch a new fund

  • Pagaya, a New York-based asset manager, has landed $US75 million in debt financing from Citigroup.
  • The upstart company will use the funds for a new leveraged fund.

Pagaya, a New York-based asset manager, landed $US75 million in debt financing from Citigroup, the Wall Street giant, the company announced Tuesday.

The company said it would use the funds for its so-called Opportunity Fund, which will utilise nascent technologies such as machine-learning and big data to invest in loans originated by tech lenders such as Prosper and LendingClub. The peer-to-peer lending space has experienced significant growth over the last five years, propelled by low interest rates. Still, money managers face a question: Which loans are worth backing?

That’s where Pagaya comes in. They use technology to help clients figure out which loans are worth investing in based off their risk profile.

“Traditional models of asset management don’t serve the needs of institutional investors in a digital age,” said Pagaya’s cofounder Gal Krubiner.

“Pagaya’s track record in delivering consistent, positive returns to LPs since inception is a testament to our advanced approach.”

A spokeswoman declined to comment specifically on those returns.

Still, the company which was launched less than two years ago has raised $US200 million in capital.

“We are proud to support Pagaya as it grows and launches new initiatives,” Ari Rosenberg, head of consumer finance at Citi, said in a statement. “This transaction is a great example of the continuing evolution of consumer credit as an asset class and growth opportunity.”

Rosenberg isn’t blowing smoke. Consumer borrowing is up big, according to a Wall Street Journal report.

As noted by the Journal, consumer debt increased by 5.5% in the fourth quarter of 2017 from the prior year to $US3.82 trillion – the highest level since the Fed started tracking it in 1999.

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