Big Investors Are Piling Into the ‘Peer-to-Peer’ Lending Market and Morgan Stanley’s ex CEO joins Lending Club’s board

After years of hype and occasional blowups, the “peer-to-peer” lending market, which connects borrowers with mom-and-pop lenders, is starting to attract professional investors.

The allure? Fat returns. At a time when interest rates are near historic lows, peer-to-peer firms such as Prosper Marketplace and LendingClub Corp. say investors can generate annual returns of 10% or higher by making loans, or pieces of loans, to their fellow citizens.

Big Players

Until last year, most peer-to-peer loans came from ordinary—and daring—investors. But big institutions are beginning to dabble in the market as well.

In the past 18 months, Lending Club has gathered 30 institutional investors, including hedge funds and wealth-management firms, and boosted its institutional assets from nothing to about $170 million, which accounts for 40% of its outstanding loans, according to the company.

Lending Club announced Thursday that former Morgan Stanley MS -5.16% chief executive John Mack has joined its board.

 

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