Lending Startup Creates Hedge Fund To Buy Its Own Loans
San Francisco-based lending startup Social Finance (or SoFi) has created a hedge fund that will invest in SoFi's loans as the company seeks to cast a wider net to fund its loans (above are CFO Nino Fanlo and CEO Mike Cagney).
The recently launched SoFi Credit Opportunities Fund, which has raised $15M and could grow to between $500M and $1B, is another avenue to grow the company even as economic concerns have slowed investment. It offers wealthy individuals, hedge funds and other institutional investors a way to invest without having to buy whole loans or securities backed by the debt SoFi originates, according to Bloomberg.
The hedge fund will buy SoFi's loans and could eventually buy up to half of its loans from the company's competitors (the fund will operate under an independent trustee). The fund will charge 25% on returns above 3% plus the short-term government debt rate. SoFi reports it originates more than $1B a month in loans.
The company had reportedly considered launching a REIT that would have bought SoFi's mortgages. [Bloomberg, SFBT]
