My career in finance began after I completed Bachelor of Commerce degree. In 1993 I joined a leading Retail Bank in South Africa and progressed to Credit Manager within a year. I subsequently relocated to London where I have worked for Coutts & Co, Deutsche Bank and BNP Paribas in a variety of credit roles. I'm now working as an Investment Manager at BondMason, juggling family life and full-time working. In short, my hands are full!
As an Investment Manager at BondMason, I report to Graham Martin, the Chief Investment Officer.
It is the role of the Investment team to identify and build relations with potential lending partners enabling us to deploy investor funds into a minimum of 50-100 loan opportunities. To date, we have met with 100+ platforms and have selected to work with just 33. Initially we focused purely on peer to peer lending but over the past year we have increased the number of specialist lenders we work with which includes various forms of asset back lending such as bridging and development finance.
Our aim as the Investment Team, is to achieve strong risk adjusted returns by deploying their capital into lending opportunities, many of which are not normally available to retail investors.
How we choose our lending partners
For a platform to be accepted as a lending partner it is required to pass our rigorous due-diligence process. In the first instance we establish through an initial call whether alignment exists between our two organisations. Are they sensible lenders? Would they generate acceptable level of returns for our investors? Is their level of risk appetite in line with ours? Are they the right size? Are there opportunities to grow alongside one another? If they appear to be a good fit, the next step is for myself and our CIO to meet with their key decision makers face-to-face, typically with their CEO, Managing Director or Head of Lending. An in-depth meeting of up to three hours will take place. During this meeting, we will look to determine:
- How long the platform has been established;
- The experience and background of their lending team;
- What type of lending they do and the typical profile of their borrowers;
- Type of security offered;
- The average loan size, rate, term, LTV (loan to value);
- Lending volumes and source of funds;
- What their anti-money laundering procedures and regulations for having client money are;
- Whether they are compliance focused and their policies for ensuring compliance;
- Their default rates and recovery processes; losses and recovery rates.
In addition, we will review all the KYC and AML documents associated with a typical live loan to satisfy ourselves that the platform is performing full due diligence on their borrowers.
Once we accept a platform, it is then our responsibility to constantly review our relationship with that Lending Partner. We speak with them regularly and meet with them on an annual basis to review processes, procedures and lending patterns. One of the key differentiator for us is how a lender acts in the event that a loan goes wrong.
Selecting the loan opportunities
Before we invest any money in a loan, we need to be 100% comfortable with the deal. Assessing new loan opportunities is the core part of my role.
A Typical Day
Assessing New Loan Opportunities
My day begins with exploring potential loan opportunities on each of our chosen platforms. Some of which send out alerts when there are new opportunities; others list available opportunities on their websites.
Each loan opportunity is entered onto our bespoke lending system. Respective platforms provide different levels of information, some are more detailed than others. Generally, as a minimum we will receive:
- A Loan Synopsis – a full breakdown of the loan including purpose, term, rate, level and type of security, background of the borrower, and importantly, the exit strategy.
- A Valuation – a formal valuation of the security by an expert. In the case of property, this will be a RICS valuation i.e. RICS is the world's leading professional body for qualifications and standards in land, property, infrastructure and construction.
My role is to then a high-level assessment of each loan opportunity. We know that we are dealing with sensible lenders with a strong track record in credit, as we have personally vetted them and their respective platform, but it is still imperative that we ensure that the loan opportunity is sensible and if anything does not stack up, to ask any relevant questions; if it is not something we would personally invest our money in, then it is not something we would put our investors into. As a minimum, the questions that need to be answered prior to investing in a loan are:
- Is the loan purpose and exit strategy clear?
- Is the level of security sufficient to cover us in the case of a default?
- Is the rate that is being offered in line with the level of risk? We would expect for example, a higher rate of return to be offered on a development loan as opposed to a bridging loan secured against a property where the plan is a quick refurbishment and then a sale.
- Is the term reasonable? We tend to steer clear of long-term loans preferring the greater flexibility afforded by short-duration positions.
- Are we comfortable with the background, history and past record of the borrower?
Depending on the complexity of the deal, I will spend between 30 minutes to an hour analysing the opportunity. The risks of each deal are recorded and my final recommendation with suggested level of commitment is submitted to the CIO or CEO. If a loan is recommended, it will need to be seconded by either one of them. If a loan is declined by just one person in the investment team, the decision is final. Overall approximately forty percent of loans reviewed are approved.
Loan opportunities will present themselves throughout of the day. If we are under-invested (our target is to be around 95% invested), I will review those platforms that offer Secondary Markets i.e. investors looking to sell their position in a particular loan. Again, a full assessment will be required of each loan opportunity.
On a weekly basis the team discuss loans on the ‘Watchlist’. This could be a simple case where a loan that has gone over term due to a delay with a refinance or a more serious scenario where the borrower is not co-operating and steps are being taken to recover the amount due. It is down to our platforms to stay on top of defaults and to manage the full recovery process; on occasion they may need a little nudge and it is my job to keep on top of this.
Any loans identified to be on watchlist, in recovery or worst-case scenario, in write-off status, are noted on our BondMason system and any customer invested in that loan can review the status and associated notes. We are proud of our record to date, with losses of just 0.35% of our AUA (Assets Under Administration).
Identifying new partners
We continually review the partners we are working with and have room to add new lenders to our approved list. As such, it is also important for me to be contacting potential new platforms. This involves identifying platforms that are growing and looking for new investors to co-fund their deals.
I have a very fulfilling role and work with a lovely team of people at BondMason. It is immensely rewarding to see a loan that I have invested in repay and deliver returns to clients invested in that opportunity. It’s also good to know that the loans we are investing in are enabling borrowers and companies to obtain funding in a flexible and cost-effective way.