– More than 2200 investors surveyed
– Majority of investors surveyed have € 5 000 to € 25 000 invested on crowdlending platforms
– A total of 65% of investors with investments across asset classes had optimistic responses to the pandemic: they either didn’t change their investment strategies, or they increased invested amounts
– Currently, 43% of investors are not changing their crowdlending investment strategies
– 11% of investors cashing out and holding off future investments
– Younger investors investing more in loans
– Stocks and ETFs are the most popular alternative to crowdlending
This April, Mintos launched the Crowdlending Survey to understand investors’ behaviours and responses to the sudden change of dynamics in the global market. We explored how investors responded to new risks and opportunities, and which strategies they chose as their reaction to the COVID-19 pandemic-caused downturn.
A total of 2294 investors helped us find the answers. The Survey was conducted in the period between 6 and 13 April 2020 among international investors and peers in their networks.
About investors in the survey
92% of the investors surveyed are currently investing in crowdlending. 90% of respondents are male, 8% are female, which corresponds to the overall investor gender split on Mintos. 70% of investors in the survey are between 25 and 44 years old. 45% of all respondents have invested with Mintos for more than one year. Based on their self-assessment, the largest group of participants (53%) said they have “some experience” with investing.
The pre-pandemic overview
We explored the size of investor portfolios prior to the pandemic and looked for correlations between the invested amount and the number of platforms invested in.
Before the pandemic, the majority of investors (70%) had between € 1 000 and € 50 000 invested in crowdlending platforms.
When it comes to the number of crowdlending platforms in the diversification mix, before the pandemic most investors surveyed (54%) were investing on 1 or 2 platforms. The next largest segment (16%) had investments across 5+ investment platforms.
We also found that investors with larger portfolios tended to invest on more platforms. Whereas 83% of investors with 1 or 2 platforms in their portfolio had € 25 000 or less invested in crowdlending, 41% of investors with investments between € 250 000 and € 500 000, and 39% of investors with investments of more than € 500 000 had 5+ platforms in their portfolio
2% of investors surveyed said that they didn’t have any crowdlending platform in their portfolio before the pandemic.
Stable sentiment towards crowdlending platforms
Overall, many investors didn’t significantly change their investment strategies. That includes changes to the number of crowdlending platforms in their portfolio.
78% of investors who had investments on 1 or 2 crowdlending platforms plan to keep the same number of platforms. Investors who were investing on 5+ platforms before the pandemic don’t plan to significantly decrease the number of platforms either. The number of investors who plan to have 5+ platforms in their future portfolio has decreased slightly from 16% to 13%. 54% of those who had 5+ platforms in their portfolio before the pandemic plan to stick with that number in the future. Only 2% of respondents who were investing with 5+ platforms plan to completely liquidate their crowdlending positions.
50% of investors predominantly invest in personal crowdlending platforms (P2P), 3% invest in business crowdlending platforms, and 1% invest in real estate platforms.
Overall, only 2% of the investors surveyed plan to completely eliminate crowdlending platforms from their future investment portfolio due to recent market developments.
Majority of respondents still optimistic
The behaviour we were the most curious about is how investors adjusted their investment strategies in response to the pandemic, both across all asset classes and within crowdlending.
A compelling majority of investors (65%) are optimistic about the possibilities of the investment market. We asked investors about their response to the pandemic, regardless of the asset class they had investments in. The largest number of investors (28%) didn’t change their investment strategies at all.
More cautious investors have reacted more defensively to the market turbulence. 30% of investors surveyed started actively cashing out their investments, pausing investing activity temporarily, or holding off future investments.
5% of participants gave more detailed answers about their immediate strategic responses to the pandemic. Their replies show a similar split in sentiment: one-third of these replies show investors took cautious or defensive actions, while ⅔ of them took optimistic actions.
Investors continued investing, reallocating existing investments or increasing their invested amounts. “I kept investing in loans issued by companies with a higher rating”, wrote one respondent, while another investor replied: “I haven’t changed (anything) yet and I don’t expect to stop investing. I might readjust strategies in some time after I understand the further developments”. Some investors returned to investing as they see opportunities in the new developments: “I divested some (investments) prior to the market panic, then I bought back in and invested more”, said one investor.
On the other hand, some investors pushed the pause button while they’re observing the market: “I’ve been following the markets closely and I will act according to what I think is the best at the given moment”. One investor replied, “I paused some investing activities to see what is going to happen”. Other investors were cashing out and decreasing their exposure: “I decrease exposure on specific (asset) classes and move partly to others while also creating a cash pillow”, said one respondent. An investor who said he lost money on some smaller platforms said: “I will be cashing out at least half of my investment in all platforms. I won’t be investing for the time being until things become more clear.”
When it comes to current strategies by the crowdfunding investors, 43% of respondents said they are not changing their portfolio preferences at the moment. 33% of crowdlending investors are reallocating their investments to other asset classes, and 4% are reallocating their investments within crowdlending.
Younger investors show the most optimism for investments in loans: 55% of those who increased their invested amount in this asset class are 18 to 34 years old.
Re-adjusting the investment portfolio size
We’ve asked investors how the size of their portfolio changed in the period March to April 2020. While 46% of investors kept their portfolio stable, a total of 54% of investors rebalanced their invested amounts: 37% decreased and 17% increased their invested amounts. For the most part, they are making adjustments of 10-30% of their invested amount (increase or decrease). A small minority of investors has made more drastic changes: among investors who have rebalanced their invested amounts, 10% increased their investments and 9% decreased their investments by 70% to 100%.
The amount of money that investors have invested across crowdlending platforms also plays a role in how they tend to approach the risks and opportunities of changing market dynamics:
– 56% of investors with investments of up to € 5 000 across crowdlending platforms are keeping their portfolio stable,
– 22% of investors with investments of up to € 5 000 across crowdlending platforms are increasing and 23% are decreasing their investments,
– 41% of investors who have investments between € 5 000 and € 50 000 are keeping their portfolio stable,
– 15% of investors who have investments between € 5 000 and € 50 000 are increasing and 44% are decreasing their investments.
Very similar behaviour is seen among investors who have between € 50 000 and € 250 000 invested and those who have between € 250 000 and € 1 000 000 invested in the crowdlending platforms. 32% and 33% are keeping their portfolio stable, 12% and 11% are increasing their investments, and 44% and 56% are decreasing their investments, respectively.
Stocks are alternative #1
We also asked respondents about their investment re-allocation preferences. Unsurprisingly, stocks and ETFs are the most popular asset class that respondents navigate to in light of crisis. A resounding 72% of investors who choose to reallocate their investments to other asset classes looked to the stock market, leaving all other alternatives far behind. Some investors (10%) are looking for additional liquidity in cash equivalents. Other asset classes only play a small role in the portfolios of the investors surveyed, split between commodities, real estate, bonds, cryptocurrencies, options and other derivatives, and currency trading (for a combined 18%).
Empathy for the borrower
Many countries have already introduced moratoriums for borrowers. We wondered how crowdlending investors feel about this, as their investments are affected by a variety of measures to help borrowers in difficult times.
We found that a vast majority of investors understands the need for moratoriums for borrowers, and 65% of surveyed investors support this move by national governments and central banks.
Conclusion
11% of investors reacted defensively to the COVID-19 pandemic, cashing out their money and liquidating their positions across asset classes without the intention to make future investments. 19% of investors put a hold on what they were doing so far, looking to understand the future developments of the disrupted market in order to make new decisions.
In the meantime, 65% of investors surveyed kept their positions, either without changes to their strategies or with more optimistic adjustments, based on evaluation and individual risk assessments. Optimistically increasing, cautiously decreasing or pragmatically re-allocating their investments, investors surveyed have shown they are serious about their activities on the crowdlending market. For these investors, loans as an asset class stand shoulder to shoulder with stocks and ETFs. Taking 72% of all asset class re-allocation, all asset classes included, stocks and ETFs prove to be the only historically attractive asset class that the crowdlending industry needs to compete with in order to maintain the attention of investors globally.
With only 2% of investors stating they might liquidate investments in loans from future portfolios, the survival of crowdlending through this crisis might make this competition easier in the years ahead of us.
Thank you to all who participated in the survey.
