What would happen if you put three of the buzziest areas of finance — roboadvising, blockchain, and peer-to-peer lending — together?
LendingRobot Series, that’s what.
The new robo-hedge fund, which combines cloud-based automation with machine learning technology, was launched on January 26 by LendingRobot, an alternative lending roboadviser based in Seattle, Washington. It’s an extention of LendingRobot Classic, which automates management of existing peer-to-peer accounts, and has $120 million in assets.
Instead of putting money into typical assets such as stocks, bonds, and commodities, LendingRobot Series provides “accredited investors” a platform to invest in business, consumer, and real-estate loans across various peer-to-peer origination platforms, including Lending Club, Prosper, and Funding Circle. These investments can yield 8% to 10% returns, according to LendingRobot.
Investors on LendingRobot pick from one of four investment preferences or “Series,” based on their appetite for risk: Short Term Aggressive, Long Term Aggressive, Short Term Conservative, and Long Term Conservative.
The firm manages all of its clients’ investments using algorithms, rather than human money managers. This allows them to charge much lower fees compared to human-run funds. LendingRobot Series doesn’t take a cut for performance. The fund charges a management fee of 1% and caps fund expenses at 0.59%.
And the firm uses blockchain, the technology behind the bitcoin currency, to allow investors to view their investments every week.
“Unlike traditional hedge funds, they can see everything,”
LendingRobot CEO Emmanuel Marot told Business Insider. “We’re not just asking them to trust us blindly,” he said.
The public ledger allows the firm’s clients to see all the notes in which the Series has invested, the current value of those notes, and the amount of money that has been paid back on those notes.
The ledger is published under a hash code, which prohibits LendingRobot Series from changing anything.
“We can’t fudge the numbers to give investors a different impression of what’s going on, because it would change the entire hashcode in the blockchain, which would invalidate it,” said Marot.
When asked if he foresees traditional hedge funds implementing some of the capabilities LendingRobot Series is utilising to stay competitive amid a number of industry pressures, Marot told Business Insider that there was no question.
“They have to change in order to adapt,” he said. “If they don’t, then they could potentially face the same fate as travel agencies, for instance, when companies like Expedia entered the market.”
“No one fifteen years ago would have thought travel agencies were going anywhere, and now look where they are today,” he added.
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