The FINANCIAL — Majority of investors surveyed by Mintos, one of the leading marketplace for investing in loans in Europe, have € 5 000 to € 25 000 invested on crowdlending platforms.
A total of 65% of investors with investments across asset classes had optimistic responses to the pandemic: they either didn’t change their investment strategies, or they increased invested amounts. Currently, 43% of investors are not changing their crowdlending investment strategies, report says. 11% of investors cashing out and holding off future investments.
Younger investors show the most optimism for investments in loans: 55% of those who increased their invested amount in this asset class are 18 to 34 years old
Stocks and ETFs are the most popular alternative to crowdlending. A vast majority of surveyed investors – 65% understand the need for moratoriums for borrowers and support this move by national governments and central banks.
The Crowdlending Survey – pre-pandemic overview
The first questions of the Survey explored the size of investor portfolios prior to the pandemic and looked for correlations between the invested amount and the number of platforms invested in. Before the pandemic, the majority of surveyed investors – 70% had between € 1000 and € 50 000 invested in crowdlending platforms. Most of them – 54% were investing on 1 or 2 platforms. The next largest segment – 16% had investments across 5+ investment platforms. Investors with larger portfolios tended to invest on more platforms. Whereas 83% of investors with 1 or 2 platforms in their portfolio had € 25 000 or less invested in crowdlending, 41% of investors with investments between € 250 000 and € 500 000, and 39% of investors with investments of more than € 500 000 had 5+ platforms in their portfolio. 2% of investors surveyed said that they didn’t have any crowdlending platform in their portfolio before the pandemic.
Stable sentiment towards crowdlending platforms
Overall, many investors didn’t significantly change their investment strategies due to pandemic. That includes changes to the number of crowdlending platforms in their portfolio. 78% of investors who had investments on 1 or 2 crowdlending platforms plan to keep the same number of platforms. Investors who were investing on 5+ platforms before the pandemic don’t plan to significantly decrease the number of platforms either. The number of investors who plan to have 5+ platforms in their future portfolio has decreased slightly from 16% to 13%. 54% of those who had 5+ platforms in their portfolio before the pandemic plan to stick with that number in the future. Only 2% of respondents who were investing with 5+ platforms plan to completely liquidate their crowdlending positions.
Majority of respondents still optimistic
A compelling majority of investors – 65% are optimistic about the possibilities of the investment market. When asked about their response to the pandemic, regardless of the asset class they had investments in, the largest number of investors – 28% didn’t change their investment strategies at all.
More cautious investors have reacted more defensively to the market turbulence. 30% of investors surveyed started actively cashing out their investments, pausing investing activity temporarily, or holding off future investments.
5% of participants gave more detailed answers about their immediate strategic responses to the pandemic. Their replies show a similar split in sentiment: one-third of these replies show investors took cautious or defensive actions, while ⅔ of them took optimistic actions.
When it comes to current strategies by the crowdfunding investors, 43% of respondents said they are not changing their portfolio preferences at the moment. 33% of crowdlending investors are reallocating their investments to other asset classes, and 4% are reallocating their investments within crowdlending.
Younger investors show the most optimism for investments in loans: 55% of those who increased their invested amount in this asset class are 18 to 34 years old.
Re-adjusting the investment portfolio size
Second part of the Survey investigated how the size of their portfolio changed in the period March to April 2020. While 46% of investors kept their portfolio stable, a total of 54% of investors rebalanced their invested amounts: 37% decreased and 17% increased their invested amounts. For the most part, investors are making adjustments of 10-30% of their invested amount (increase or decrease). A small minority of investors have made more drastic changes: among investors who have rebalanced their invested amounts, 10% increased their investments and 9% decreased their investments by 70% to 100%.
The amount of money that investors have invested across crowdlending platforms also plays a role in how they tend to approach the risks and opportunities of changing market dynamics:
56% of investors with investments of up to € 5 000 across crowdlending platforms are keeping their portfolio stable,
22% of investors with investments of up to € 5 000 across crowdlending platforms are increasing and 23% are decreasing their investments,
41% of investors who have investments between € 5 000 and € 50 000 are keeping their portfolio stable,
15% of investors who have investments between € 5 000 and € 50 000 are increasing and 44% are decreasing their investments.
Very similar behaviour is seen among investors who have between € 50 000 and € 250 000 invested and those who have between € 250 000 and € 1 000 000 invested in the crowdlending platforms. 32% and 33% are keeping their portfolio stable, 12% and 11% are increasing their investments, and 44% and 56% are decreasing their investments, respectively.
Stocks are alternative #1
The third part of the Survey asked respondents about their investment re-allocation preferences. Unsurprisingly, stocks and ETFs are the most popular asset class that respondents navigate to in light of crisis. A resounding 72% of investors who choose to reallocate their investments to other asset classes looked to the stock market, leaving all other alternatives far behind. Some investors – 10% are looking for additional liquidity in cash equivalents. Other asset classes only play a small role in the portfolios of the investors surveyed, split between commodities, real estate, bonds, cryptocurrencies, options and other derivatives, and currency trading (for a combined 18%).
Empathy for the borrower
Many countries have already introduced moratoriums for borrowers. The last part of the Survey evaluated how crowdlending investors feel about this, as their investments are affected by a variety of measures to help borrowers in difficult times. A vast majority of investors understand the need for moratoriums for borrowers, and 65% of surveyed investors support this move by national governments and central banks.
Martins Sulte, CEO and Co-Founder at Mintos, concludes:
“We see that 11% of investors surveyed reacted defensively to the COVID-19 pandemic, cashing out their money and liquidating their positions across asset classes without the intention to make future investments. 19% of investors have put on hold what they were doing so far, looking to understand the future developments of the market in order to make new decisions. In the meantime, more than half of investors surveyed kept their positions, either without changes to their strategies or with more optimistic adjustments, based on individual risk preferences.
Optimistically increasing, cautiously decreasing, or pragmatically re-allocating their investments, investors have shown they are serious about the crowdlending market. For these investors, loans as an asset class stand shoulder to shoulder with stocks and ETFs. We see that for 72% of all investors who did asset investment re-allocation as a result of the pandemic, stocks and ETFs prove to be the two main traditional asset classes that investors consider for investing.”
About Mintos Crowdlending Survey
The Mintos Crowdlending Survey researches the attitudes and behaviors of retail investors on crowdlending platforms. The survey was conducted in the period between 6 and 13 April 2020 among a total of 2294 international investors and peers in their networks. Out of all Crowdlending Survey respondents, 90% of respondents were male, 8% were female, and 2% of respondents did not wish to disclose their gender. Based on their self-assessment, the largest group of participants – 53% said they have “some experience” with investing. 70% of surveyed investors are between 25 and 44 years old. The findings of the Mintos Crowdlending Survey are shared with all participants as well as 300 000 investors on Mintos.
Crowdlending, also called peer-to-peer lending or marketplace lending, is where retail investors invest money in loans in return for interest. Loans are an asset class, next to more traditional assets such as stocks, bonds, real estate, and other. Thanks to technology, it is simpler than ever to become an investor on any of the crowdlending platforms, while doing a thorough evaluation of each one. There is a variety of crowdlending platforms. As with any investment, investing in loans puts capital at risk – each investor is responsible for evaluating associated risks before making an investment.