cp: XXX
title: POP MarkitLend US Consumer Credit
author: MktLend
uses-component: CP5
technical-proposal: yes
requires-onchain: yes
status: rfc
date-proposed: 2024-09-18
date-ended:
MARKITLEND US CONSUMER CREDIT FUND, LP
MarkitLend proposes to open a Pool enabling holders of StableCoin to invest MarkitLend US Consumer Credit Fund, LP.
There will be 3 tranches.
The first will be the Direct Tranche. This tranche will refelect the equivalent of a direct investment into the Fund. The NAV of this Tranche will mirror that of the Fund.
The second Tranche will be the Senior Tranche. It has a targeted yield of 6%.
The third Tranche will be the Junior Tranche, which will reflect earnings over and about 6% earned by the Senior Tranche.
The Senior Tranche will receive principal and interest up to the point where it obtains a yield of 6%.
The Junior Tranche will receive principal and interest thereafter and will have a targeted yield of 14%.
Comments and feedback are welcome. After the Pool is approved, a final term sheet and offering circular will be available.
A fulll copy of the proposal maybe accessed using the following link:
Section 1 – Overview
Value Proposition/Investment Thesis:
MarkitLend US Consumer Credit Fund enables investors to access an asset class traditionally available only to banks and institutional investors. The Fund invests in diversified portfolio of consumer loans originated and servicd by prosper.com and lendingclub.com.
Our investment strategy has provided steady, low volatility returns on average 7.5% per annum since 2017.
This makes it an ideal investment for investors’ medium term savings and retirement accounts.
Section 2 - Key investment merits
- Steady yieds of around 7.5% per annum, net
- Short duration – loans range from 1 – 5 years with overall duration 2.75 years
- Regular pricing – Daily NAV
- Daily payments of principal and interest create liquidity for redemptions
- Manager has a long term track record
For more info about MarkitLend and our Fund see www.markitlend.com
Section 3 – Structure
Investors can select one of three structures
a. Base tranche – this is the tokenised equivalent of a direct investment in the Fund.
b. Senior tranche – Senior holders receive a structured fixed yield of 6%, supported by investment in the fund assets and the loss cushion provided by the junior tranche.
c. Junior tranche – the Junior tranche receives a variable yield depending on the overall return of the portfolio and is subordinate to the Senior tranche in terms of principal repayment.
Section 4 – Return Profiles
The fund has historically generated on average 7.5% per annum. This implies a return of 16% for the Junior Tranche.
For sake of clarity, the Senior tranche participates in income up to 6%. When fund income is between 0% and 6% the Junior tranche is getting a 0% yield. When fund income is below 0% the Junior tranch subsides the senior tranche, reflecting the senior tranche’s priority claim on principal.
It should be noted that the loans pay interest and principal monthly.
Section 4 – About the Fund
The Fund was established in 2017 with personal capital of the partners. The strategy is to make investments in loans to US Consumers, the stated purpose of which is refinancing credit cards and / or personal loans.
The Fund invests in loans originated by Prosper.com and LendingClub.com, both of which have been operating for more than 10 years. These companies not only originated the loans, but also keep custody of the loans and service the loans, collecting interest and principal monthly. Loans more than 180 days late are considered defaulted.
Loans typically pay interest of 8% to 25%, depending on their risk rating, as specified by the originator. MarkitLend uses proprietary software to analyze each loan listing and determine whether or not to select the loan for inclusion in the portfolio. Our algorythm includes more than 60 variables that are on each loan application. Loans are issued with maturities of 1 to 5 years. They pay interest and principal monthly. The portfolio is highly diversifed and contains nearly 1300 loans. Monthly receipts are either distributed to fund holder or reinvested.
The Fund Manager maintains a loan loss provision based on the overall expected default rates. The provisioning ranges from 5% to 7.5% and is intended to ensure that during that course of any month the portfolio has sufficient reserve so that defaults don’t flow through directly to the income statement. Of course, if the provision is not sufficient, the NAV will decline as a result of defaults.
Typically loans that default will do so sometime between 12 and 20 months into the loan terms. This means that by the time the loan defaults as much as 40% of the principal has been collected, in addition to interest earned during the time the loan was performing. Following default some loans resume performing. Others are sold to collection agencies. In both cases the portfolio will see cash receipts, which are counted as earned income. This income mitigates some of the loan losses, most if not all of which were provisioned while the loan was held. (See more at https://markitlend.com/consumer-credit/)
The NAV is calculated daily. Down days have been few and far between. To date since April 2017 there has never been a down month. Interest is credited as an when received. When loans are not performing no interest is recorded. With this methodology the Fund NAV, calculated daily, provides an accurate and transparent indication of the investment value.
The loans purchased are held to maturity. There is no liquid, readily available, secondary market for the loans the fund holds.
Click here to see a full presentation of the fund.
About MarkitLend
Overview:
Company Name: MarkitLend Investment Advisors, LLC
Location and Team Size: Tampa, Florida. The team is headed by Michael Sonenshine and Fernando Sanchez, who founded MarkitLend in 2017.
Founding Team, Experience, and History
Mr. Sanchez has a career spanning 30 years in finance and financial management. He held senior management positions with firms such as Johnson & Johnson, ArthroCare, Body Media and Healthland. He is the architect of the MarkitLend investment strategy and the proprietary software which selects loans that go into the portfolio. Mr. Sanchez has been investing in Consumer loans since 2010.
Michael Sonenshine also has more than 20 years of experience and is a credit specialist. He began his careeer at ING, where he managed bond portfolios for ING’s insurance arm. He also wrote some of ING’s first research in the European High Yield credit sector. He went on to become a top ranked High Yield Analyst. He was among the founding partners of the MT Thaler New Europe Fund, where he was in charge of a portfolio of Emerging Markiet Corporate and Western European High Yield bonds.
Current AUM: The Fund has US$ 400,000. It is important to note we have only recently opened to external investors.
Centrifuge specific topics
Go to Market: We believe this investment should be attractive to DAOs and holders of crypto currency who want to diversfy their investments into Real World Assets. We plan to focus our marketing efforts toward investors who wish to invest Stable Coin and want to have selection of assets that is not readily available to the Stable Coin and DAO community.
Our fund returns are now accessible on the Prequin and Albourne databases and we are targeting the community of investors the looks for investments in private debt.
Additionally, we will continue our outreach to individual investors and small family offices.
We believe the fund can get to at least $20 mn over the next 12 months.
What does your company do?
MarkitLend is an investment advisor registered with the SEC as an Exempt Reporting Advisor pursuant to the private capital provisions in the Investment Act of 1940.
What makes your approach unique within your industry?
MarkitLend is one of the few private credit funds that enable investors to access this market segment.
How do you differentiate yourself from competitors?
Firstly, we don’t employ leverage, in contrast to many of our competitors. Secondly, we only invest in loans whose stated purpose is credit card refinancing or debt consolidation. Consumers who are refinancing credit card debt do so because they can get overal lower interest rates and while improving their credit profile. We believe this enables us to invest in loans that offer realtively favourable return/risk ratios. Thirdly, we use a proprietary software selection tool that take into account about 65 discrete variables on the investor application. Finally, we maintain a policy of provisioning for anticipated credit losses. This ensures that our NAV is generally stable, since defaults tend to hit the loss loss provision on balance sheet rather going directly to the income statement. In fact, our fund has never had a down month.
Company Financing:
Equity raised: MarkitLend has not taken in any equity investors,
apart from its founding partners.
Debt funding: MarkitLend investment Advisors has no debt.
The company has not leveraged the fund, nor has the company collateralised its investment in the fund.
Revenue model:
Origination fees: The Fund does not take origination fees.
Target spread: The fund invests at gross yields typically as low as 8%
for the Class A loans to as high as 25% for the class E loans. Overall the fund provisions about 7% of assets in respect of loan default losses.
Click here to see our track record and manager bios.
Michael Sonenshine
CIO, MarkitLend
msonenshine@markitlend.com
+1 646 863 9450
Visit our website at www.markitlend.com
Book a time to speak with us at Calendly - Michael Sonenshine