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Much will depend on the investor’s risk appetite and investment time horizon.
Industry players who spoke to
Wealth suggest that, as a rule of thumb, P2P financing as an asset class tends to fall between fixed income and equities in terms of risk-return.
The asset class has a higher risk-return compared with fixed income because of the type of business being financed: small and medium enterprises (SMEs). SMEs tend to be riskier financing propositions in general. Concurrently, the asset class is less risky than equities because investors do not have to worry about capital depreciation (share price movements). But, P2P returns are not expected to match that of equities.