Pagaya teams with Prosper in third AI-driven ABS deal

Pagaya Investments has partnered with Prosper Marketplace for a third unsecured consumer-loan portfolio issuance from its AI-managed securitization platform.

The financial technology company announced Thursday it had closed a $115 million asset-backed securities portfolio backed by loans it has acquired from Prosper. The deal was structured by Cantor Fitzgerald.

In Pagaya’s two previous securitizations, the originators of the loans were not identified. But a press release issued Thursday confirmed that Prosper has been a “long-term” partner with Pagaya, which launched the first of its three privately placed ABS deals earlier this year.

“As a long-term partner of Pagaya, we appreciate their ability to bring more investors into the consumer credit space,” John Goldston, vice president of capital markets at Prosper, said in the release. “We are excited to continue working alongside Pagaya to unlock new opportunities to connect people who want to borrow money with institutions that want to invest in consumer credit.”

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The deal is the largest-to-date for Pagaya, which has accumulated $750 million in assets from marketplace lenders to package into collateral for investment securities.

Pagaya states that its portfolios are stocked with loans purchased solely through its proprietary artificial-intelligence technology platform. The AI selects and purchases assets based on “millions” of data points and algorithms, rather than acquired through a pre-assembled apportionment of loans, according to Pagaya.

The portfolios are actively managed, through buying and selling, with the same AI technology, instead of through individual portfolio manager decisions.

The release Thursday did not provide details on the collateral, but Pagaya’s chief executive and co-founder, Gal Krubiner, has previously told Asset Securitization Report that the loans purchased by the firm were prime loans with average balances of about $10,000, with APRs of 13%-16%.

Pagaya, founded in 2016, has raised startup capital from venture capital funding as well as Citigroup to fund its machine-learning, big data analytics technology. It operates fixed-income and alternative-credit funds to institutional investors such as pension funds, insurance companies and banks.

The company has offices in New York and Tel Aviv, and its client base includes Citi as well as banks and insurers in Israel and Europe.