A Bellevue, Washington-based startup has launched an automated hedge fund to buy credits from online lenders using blockchain technology, according to The Wall Street Journal. Algorithmic Inc., which does business as LendingRobot, is targeting a return of 7.5% net of defaults.
The service began in 2012 automating retail investors’ purchases of loans from LendingClub Corp. and other online lenders. The service now has more than 6,000 clients with over $110 million in assets.
LendingRobot algorithms will automatically move investor funds among four options based on risk tolerance and investment horizon, the way “robo advisers” like Betterment LLC rebalance portfolios in exchange traded funds.
Data on options will record on the blockchain.
Emmanuel Marot, LendingRobot chief executive, who previously co-founded a mobile search engine company and sold it to Microsoft Corp., said he hopes keeping the data on a shared ledger will reassure investors since it is designed to be tamper-proof.
Online lending took a hit last year after LendingClub had to restate returns because its loan data was altered. The company changed its chief executive and took measures to improve internal controls.
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The new hedge fund marks one of several fintech projects that have combined technologies that developed in different siloes.
Social Finance Inc., an online lender that began in 2011 by refinancing student loans over the Internet, recently expanded into life insurance and wealth management.
Money Lion, a smartphone app for managing personal finances, secured a line of credit last year from an investment bank to begin making loans.
LendingRobot has to convince investors that online loans are worthy investments in light of poor performance of some large funds and rising defaults. The firm will charge no performance fee and only a 1% management fee.
Marot said he would be glad to see the fund managing $100 million in assets by the end of this year.
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