The billionaire George Soros is preparing to back the peer-to-peer lending industry, which is increasingly leaning on traditional capital sources to cheapen funding costs.
Soros Fund Management officials, including a portfolio manager and a strategist, have met repeatedly with potential partners over recent months, people who attended the private meetings said.
Capital allocation has not yet been determined, and formal announcements could still be months away, according to one of the sources, who described the plans as still in a planning phase.
The Soros portfolio manager and the strategist did not reply to messages left on their office voicemail machines and sent to their office email addresses. Michael Vachon, a spokesman for the firm, declined to comment.
Rising institutional interest is amounting to a takeover of the once individually funded credits, and making the label "online marketplace lending" more apt.
BlackRock, Fortress Investment Group and the boutique investor Waterfall Asset Management have been seen beefing up their cash machines in recent months. BlackRock may be the most heavily invested in marketplace lending, but the spectrum of engagement now includes money managers, business development companies, banks and, soon, life insurance companies, advisers say.
Institutional investors alone may already be committing around $6 billion through almost 40 different funds, according to Matt Burton, the chief executive of Orchard Platform, which matches institutional investors with lenders. Only some $9 billion is expected in total annual origination volume this year.
As many as 12 large funds are each committing $200 million to $400 million, to purchase assets from direct-lending platforms such as Lending Club and Prosper, Burton said, adding that some 25 midsize investors have injected on average $50 million each to asset purchases.
"There are a lot more [investors] to come," he said.
Burton claims the business of matching lenders and investors is booming, and if he wanted to, he could turn his business cash-flow positive in six months' time. Large life insurance companies are looking to put their money to work, too, he said. No insurance companies have yet formally announced their investments.