Private debt is a favourite asset class of many family offices. They like it because of its high returns, low volatility and decorrelation with other assets. London-based Fintex Capital believes private debt linked to tech-enabled platforms is where some of the best returns will come from in this market in the years ahead. And it is offering a dynamic platform to access these returns.
Robert Stafler, co-founder and CEO of Fintex, says the confluence between technology and lending is a high growth area. “A few years ago, the founders of Fintex recognised an enormous trend,” he says. “Tech platforms combine a great customer journey with high-quality lending. This combination is becoming relevant to institutional investors and some family offices.”
We are a group of highly experienced 40-something-year-olds with thorough financial experts who understand the intricacies of finance and are using technology to maximise our offering to our investors
Fintex saw a gap in knowledge of the emerging world of tech lending among institutional funds. “The migration of lending in the traditional sense to tech-based platforms is happening,” says Robert.
What Fintex understands is that tech-enabled credit is here to stay, will continue to grow at pace and has certain quirks that institutional investors like family offices need to learn about. “And we’ve learnt it on their behalf first. Complex, not trivial and learnt by doing,” says Robert.
To do that learning, Fintex has invested considerable capital into technology, as its chief investment officer, Sophie Batoua, explains. “We invest in tech-enabled loans, so we need to understand what the tech involvement is in the process. Also, how that tech is involved in origination, how it works in general, and whether it’s properly used or not.”
To help Sophie and her team do this and more, Fintex has developed multiple proprietary pieces of technology, called LISA. An in-house tech platform, LISA enables Fintex to optimise efficiencies from both an operational as well as a risk management perspective.
“One crucial element of LISA is how it presents the information, which is critical for how Fintex’s analysts can make the right decisions. It is important to have a good visual tool based on which we make our decisions,” says Sophie. “This enables us to quickly know where the issues lie, or whether there is no issue to worry about.”
Fintex has developed a robust tech platform, so investors don’t have to do all the heavy lifting themselves. “Fintex is extremely specialised,” says Robert. “Even big insurance companies which are very involved in parts of the private debt market don’t have what we have in-house.”
And that is what differentiates Fintex; they enjoy a unique position in the market by focusing on alternative credit strategies but with a tech-enabled approach.
Given Fintex’s technology platform, isn’t the company a classic example of a fintech startup? “Yes, to some extent”, says Robert, “but not in the conventional sense. We are a group of highly experienced 40-something-year-olds with thorough financial experts who understand the intricacies of finance and are using technology to maximise our offering to our investors. I think this makes us much more solid and appealing to our investor base.”
Experience is undoubtedly something Fintex management has in abundance. Before he co-founded Fintex, Robert played an important role in helping to grow and establish auxmoney GmbH, Germany’s top lending platform, which has originated more than €1 billion in loans. He has also worked for JP Morgan and set up Excellion Capital, a corporate finance advisory firm and a discretionary investment fund.
Jérôme Anglade, Fintex’s other co-founder, has 18 years’ experience in structuring, trading and risk-managing fixed income products having spent more than 11 years at Morgan Stanley where he was managing director and head of the European Structured Credit Group. Previously, he served as global head of structured illiquid credit trading at Bank of America Merrill Lynch and as a senior portfolio manager at Citi Capital Advisors.
In early 2013, Jérôme co-founded Maple Bay Asset Management, an independent fixed-income investment management firm investing in US P2P consumer loans on Prosper Marketplace, one of the world’s largest marketplaces for peer-to-peer loans.
Sophie joined Fintex after 17 years at Societe Generale, where she had a series of senior positions in the bank’s structured credit business. She also served as director of operations for credit derivatives at SocGen.
Fintex offers investors three core credit strategies:
Fintex Confluence, which invests in UK secured finance and has close to £30 million of assets under management.
Fintex Origin, which invests in German consumer loans and has around €75 million of assets under management.
Fintex Elevator, which invests in US consumer loans and has $30 million of assets under management.
Credit investment into these three strategies has come from some solid backers like Europa Capital which is part of Mitsubishi Estate and The Rockefeller Group.
“Family offices have also provided a considerable amount of Fintex’s assets under management, as has our own team”, says Robert. “We are looking for institutionally-minded family offices, which appreciate the work we do. Our strategies are ideal for big family offices because they are designed for investors that wish to lean back and take a long-term perspective”.
“The place to generate yield for investors not unduly concerned about liquidity is the private debt market. That doesn’t mean there is a gate around liquidity,” Robert hastens to add.
“The long-term aspect of our strategies doesn’t mean investors can’t access their money when needed. For example, two investors in one of our funds needed to divest – we managed to cash them out in three days. There is intrinsic liquidity in what we do, in addition to accessing the secondary market.”
The fee structure is also very investor-friendly, says Robert. “With ample skin in the game, our modus operandi is to align our interest with theirs.”
Typically, net of all fees and costs Fintex’s Confluence, the UK secured lending strategy, is looking to beat 7% annual returns. Given meagre bond yields, volatility in global equity markets, and the uncorrelated nature of the markets Fintex is accessing, its strategies would appear to make sense for family offices.
Currently, assets under management at Fintex are more than $125 million. With an ever-increasing interest from prominent institutions and family offices, by the end of the year, that number is expected to have increased substantially, again.