Morgan Stanley IM: An Introduction to Alternative Lending

Morgan Stanley IM: An Introduction to Alternative Lending
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As investors seek to diversify their portfolio exposures beyond traditional assets, alternative lending may offer attractive absolute and risk-adjusted return characteristics.

10.10.2023 | 08:36 Uhr

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An allocation to alternative lending may provide investors with exposure to a secular shift in the way consumers and small businesses access capital. In this paper, we provide insights on this asset class and discuss why we view it as a through-the-cycle allocation for well-balanced portfolios.

What Is Alternative Lending?
Alternately referred to as marketplace lending, peer-to-peer lending and P2P lending, alternative lending takes place through online platforms that use technology to bring together borrowers underserved by traditional lending institutions, with loan investors seeking attractive yield-generating investments. The lending model grew out of small-balance, peer-to-peer unsecured consumer loans financed by individual investors.

As the asset class matured, alternative lending evolved so that most loans are funded today by institutional investors, a group that counterintuitively includes even banks.1 Recognizing their technological and geographic constraints, community banks may focus on their core competency of deposit gathering while outsourcing credit underwriting and servicing to alternative lending platforms.

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Any charts and graphs provided are for illustrative purposes only. Any performance quoted represents past performance. Past performance does not guarantee future results. All investments involve risks, including the possible loss of principal. Persons considering an alternative investment should refer to the specific fund’s offering documentation, which will fully describe the specific risks and considerations associated with a specific alternative investment.

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