Orca Q&A
Orca is an interesting concept for investors who want to keep their peer to peer lending investments organised. Orca automatically spreads investors money across a range of lower risk products and loans from companies such as Landbay, Assetz Capital and Lending Works.
I don’t invest through Orca myself but have had good conversations with CEO Iain Niblock including this question and answer session.
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Q: For someone who might not be familiar, can you explain briefly what Orca offers lenders?
Orca allows investors to invest across multiple P2P platforms, earning them returns, diversifying their risk and saving them time. All from the one Innovate Finance ISA.
Q: Is Orca FCA regulated by the FCA?
Orca is an aggregation platform which connects investors with P2P platforms. We are a gateway to the P2P market, facilitating investment directly with the platforms. Our role is to conduct due diligence, curate investment opportunities, administer the deployment of funds and report on investment performance. All P2P platforms included in the Orca product are fully authorised and regulated by the FCA. Orca participated in the FCA Innovation Sandbox which confirmed Orca as an unregulated business.
Q: How long has ORCA been in business and is it profitable? If not when is ORCA expected to be profitable?
Orca was founded in 2015 and for the first couple of years we provided in-depth research into the P2P market. This gave us a deep understanding of the sector and an appreciation of investor requirements. In early 2018 we extended our services to not only offer research services but also the functionality for investors to invest across the market. In February this year, we launched the first multi peer to peer platform Innovate Finance ISA.
Q: How is Orca funded?
As well as revenue, Orca is funded by two venture capitalist investors and a number of private investors. We also raised £574k on the Seedrs crowdfunding platform in November 2018.
Q: Was Orca’s product easy to bring to market? What were some of the challenges you faced as a startup?
Although our mission is simple, to provide the simplest and most efficient way to invest across the P2P market, the implementation of this mission has not been straight forward. Strong relationships with the P2P platforms have proven essential in establishing our product as they are central to our proposition. Confirming our regulatory position was also a challenge, fortunately, the FCA Sandbox opened a dialogue directly with the regulator.
Q: What are the advantages Orca offers over a traditional p2p company?
Orca offers the following unique benefits to investors:
Ability to invest across multiple P2P platforms, lending sectors and a large number of borrowers, all from the one platform
Automatic diversification across a wide range of investments
Orca has conducted in-depth due diligence on all P2P platforms that are integrated into the Orca product
One IFISA, multiple P2P platforms
Investment monitoring on an individual investment and overall portfolio basis
Q: Since Orca doesn’t offer loans but rather offers companies for lenders to invest through, how does Orca decide which platforms to offer lenders?
We have a strict due diligence process which focuses on investor returns, liquidity, loan performance and platform stability. To evaluate the type of lending the platform conducts we analyse the platform loan book. Our methodology for appraising lender loan books was developed in partnership in Dublin City University. As we invest more client funds we are also acquiring more and more data on actual investment performance at the P2P platforms. This data gives us a unique insight into the market.
The stability of the P2P platforms also poses a risk to investors. We regularly visit each lender and perform analysis on the financial strength of the lender.
Q: Do you plan on offering further platforms to lenders?
Yes, we would like to add more lenders, but only the P2P platforms which meet our due diligence requirements. Our aggregation platform is a curated aggregation as oppose to accepting all lenders. We genuinely believe in P2P as an asset class, however we are also aware that not all P2P platforms operate equally and we only want to work with quality lenders. Our proposition is only as good as the lenders which we work with.
Q: It seems Orca chooses lower risk property backed p2p loans versus higher paying development loans. What’s the reasoning behind this choice?
Our view is that all retail investors should allocate a proportion of their overall investment portfolio to P2P. However, we caveat this statement by saying that not all P2P investments are suitable for widespread adoption. Some offer high risk, or niche assets which are perfect for more sophisticated investors, but not the masses.
To offer a mainstream product, the returns we offer need to be stable and predictable. Returns generated from development finance loans can be higher, but also susceptible to property development risk. Loan repayments often run late, which can cause liquidity issues.
Q: What is Orca’s single biggest current challenge?
Candidly, the industry has reached a point where we need to break into a new audience of retail investors. The growth from retail investors has slowed in the past year with the majority of the sector growth coming from institutional investors or existing investors increasing their balances. The biggest challenge, not just for Orca but for the sector is to encourage more retail investors to benefit from this asset class.
Q: As other p2p companies reduce rates, what are the projection for lender return rates for the upcoming year?
We offer two investment portfolios, Orca Pure and Orca Plus, offering indicative returns of 4.3% and 5.3% respectively. Both portfolios provide an allocation across five P2P platforms and either portfolio can be held within an Orca IFISA.
Q: What are Orca’s fees?
There is a withdrawal fee of 0.2 – 0.4% which is a fee charged by the peer to peer companies. Orca does not charge additional withdrawal fees.
Orca otherwise is fee free until April 2020. The annual fee will be 0.65% per year. You can read more about the fees here.
Q: Do you think p2p lenders concerned about Brexit affecting their p2p investments?
Unfortunately, I think Brexit has affected all investment markets, including P2P. Any unsettling sentiment drives investors to hold more cash. My feeling is that this has impacted P2P more than traditional markets as P2P is often thought of as savings accounts with extra risks. Whether this comparison is correct or not, it draws P2P as an alternative to holding cash.
Q: What are your thoughts on the future of p2p lending if an economic downturn were to occur?
I am positive that the quality P2P platforms will perform well in an economic downturn. During a downturn we are likely to see volatility in listed markets and significant drops in asset value. P2P is not driven by market sentiment and the value of the assets are less susceptible to market volatility. During a downturn P2P is likely to perform better than other listed asset classes and this may shine a light on the beneficial characteristics of a P2P investment.
That said P2P investments are affected by macroeconomic conditions and investors portfolios will be impacted. A rise in unemployment would hit the consumer lender market, a rise in insolvency rates would affect business loans and property prices would impact the property lending market.
Q: Can you explain how lenders records are kept and secured in the event Orca ceased to trade?
Orca is a technology platform, facilitating investment across a range of P2P platforms. Investors are registered directly at the underlying P2P platforms in their own names. If Orca was to become insolvent investors would be given access to their underlying P2P accounts. Our aim when developing Orca was to reduce investor risk and we felt if we placed a structure, such as a fund in between the investor and the P2P platform the investor would be exposed to an additional layer of risk.
Q: What are the advantages of investing with Orca as opposed to your competitors?
Orca is the only investment aggregation platform in the UK which allows investors to invest across multiple P2P platforms. Our solution is perfect for investors who want to rapidly gain exposure to P2P as an asset class. We offer a diversified solution, all within one IFISA.
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** This Orca peer to peer lending page is for information purposes only. This information is not financial advice and has been prepared without taking your objectives, financial situation or needs into account. You should consider its appropriateness for your circumstances. All investing carries risks. Opinions expressed in this review are opinions based on my own personal experiences. The FSCS does not cover peer to peer lending and your capital is at risk. Please don’t invest more than you can afford to lose. **
