Pushing the online lending industry forward creating a deeper secondary market or bringing the industry under greater scrutiny? SOFI, CEO, Cagney has launched a hedge fund with $15m (could grow it to $1b). Initially the fund is investing in SoFi loans but over time it will seek to deploy up to half its capital on loans from other platforms.
Closely held SoFi is setting up the new fund to tap investors that don’t want to buy the firm’s whole loans or asset-backed securities directly. This includes some wealthy individuals, funds of hedge funds and even some institutional investors. A fund would allow SoFi to support the market for its loans without needing to raise cash by selling shares. The plan has raised concerns that running a hedge fund could set up conflicts with SoFi’s main business of arranging loans for consumers. The fund’s attachment to SoFi also might make rivals less likely to turn over detailed information about the loans it might buy. Some other online-lending platforms say they haven’t considered similar funds in part because of those complexities.