Institutional investors play an important role in Estateguru’s business model, so understanding how they complement rather than compete with our retail investors is vital.
As Estateguru continues to grow and expand to more countries, we have broadened our investor base to include an increasing number of institutional investors.
To explain and illuminate the strategic thoughts behind our pursuit of more institutional investors, no one is better placed than Willem Reddingius, Estateguru’s Director of Capital Markets.
He recently granted an interview to P2P Empire on their popular Talks show (which you can watch in full below). Here are a few highlights of the topics discussed that should serve to give you a good overview of the role of institutions in the Estateguru model.
Here is some of the key information you need to know about institutional investors at Estateguru.
How Estateguru defines institutional investors
The basic definition of an institutional investor is a party that provides or manages money on a professional basis. Examples are pension funds, insurance companies, asset managers, banks, debt funds, or hedge funds. It is not related to the amount invested.
Why institutional investors are important
There are several reasons why increasing the number of institutional investors is important, not least of which is the fact that they allow Estateguru to grow at a much faster rate, which also facilitates a broadening of offerings to our investors and borrowers. The increase in available capital allows us to serve larger loans in more jurisdictions. There is also a string reputational element. Having large, established partners onboard boosts Estateguru’s credibility and serves as a stamp of approval for the quality and value we offer.
The onboarding process for institutional investors
Although all investors require significant due diligence, the actual process differs significantly between investors. Typically, onboarding a new institution involves a long and complex process. Institutional investors require a lot of due diligence, while the legal and regulatory process is detailed and complex with quite a high number of parties involved
What institutional investors look at when considering Estateguru
In many ways, institutional investors consider the same things as retail investors do, with the basis always being the strength and track record of the management team. They consider their experience, length of time working together and what has been achieved. Just like with retail investors, it boils down to trusting the team you are handing your money to. Of course, the platform’s actual track record, the expected yield, and speed of putting money to work and the number of projects also matter.
Beyond this, there are more detailed factors like legal, compliance, regulatory, collateral, structure, IT platform and IT security that are also important.
What type of investment strategies do institutional investors follow?
We see a lot of different strategies and it highly depends on the type of institutional investor. Some have a dedicated fintech/lending platform strategy, while others are attracted to the real estate angle that we offer. A big part is driven by the regulatory environment, the high amount of liquidity in the market and the consequent search for yield.
What percentage of total investments are through institutions?
It is currently a small but growing part of our funding base, but eventually, we expect institutional funding to be a major part of our funding sources.
Will this disadvantage retail investors?
No. It will always remain our policy that retail investors will have equal opportunity to invest in each loan. More specifically, each loan will be funded by both sources if possible. The fact that we will be able to offer more, bigger loans will actually be a major positive for our retail investors base.