Investor spotlight: Merseyside Pension Fund

A mysterious development at Canary Wharf is at the centre of one of the most novel transactions completed in the UK real estate debt market this year.

Towards the end of March, marketplace lender LendInvest partnered with the Merseyside Pension Fund (MPF) on the underwriting of a £12 million ($15 million; €14 million) loan to a property developer in the heart of London’s financial district.

Details of the project remain under lock and key, but under the terms of the agreement, LendInvest will hold half of the deal amount and syndicate the other half to the pension fund. There is little evidence of similar partnerships between institutional investors and marketplace lenders taking place in the UK market.

MPLs have received a lot of attention in the last 12 months. Heavyweights ranging from the former chair of the now defunct Financial Service Authority, Lord Adair Turner, to the current Bank of England governor, Mark Carney, have had their say on the longevity of the business model. Some conclusions are good, some bad, but with a consensus that the model is here to stay.

But while there is now acceptance, where there was once scepticism, experienced UK players are recognising the importance of the need to evolve. The industry may have been built on retail money, but experienced firms are looking to attract institutional capital into the space as a way to move forward with their strategies.

“As MPLs develop their track records, systems and governance, they will be more attractive partners for institutional investors,” says Rod Lockhart, managing director at LendInvest.

Over the last 12 months the industry has seen a steady flow of cash move into the market. In June, Funding Circle secured a £40 million investment from the British Business Bank while Zopa, a firm established in 2005, completed the securitisation of corporate loans originated by the platform in September – a first for the UK MPL market.

LendInvest is betting on similar partnerships akin to the one with MPF taking off in the future with Lockhart reporting discussions on more transactions already in motion. With greater firepower for MPLs, they can make their presence felt in the broader UK real estate market by underwriting bigger tickets.