The first Australian fund to invest in peer-to-peer loans, set up by former Goldman Sachs banker Steven Sher and former Bain & Co consultant Gavin Solsky, is the latest of a new breed of financial intermediaries. 
Global Credit Investments has been buying loans from giant US "marketplace" lenders Lending Club and Prosper for about a year and has built a portfolio approaching $10 million, with about 20 investors.
Sophisticated investors and institutions can invest in these loans via GCI, with claimed "high-single-digit" returns including its fees, based on detailed assessments of the lending platforms' loans. GCI charges a 1 per cent fee.
It joins about six similar private funds buying peer-to-peer loans in the US.
Australian investors can lend via local marketplace lenders such as Society One, RateSetter Australia and MoneyPlace, but they cannot loan money on offshore platforms. GCI has formal arrangements with these platforms that allows its systems to buy loans automatically based on parameters pre-set in GCI's software.
Mr Solsky said the amount of detailed information on each loan published by the US marketplace lenders allowed GCI to automate the credit assessments it made on the loans it bought from them.
"We are making an active decision on every loan that we buy. Lending Club and Prosper publish all of their data, so it is completely transparent. We can't get the identity of the borrower, but we can get data on every payment that has been made on these loans, their [personal credit score], whether they own their house, have a mortgage, rent their house, how long they have been employed," he said.
  Own algorithm  
"We have come up with our own algorithm, which says 'Yes, we think the underwriting processes of these platforms is robust because they have been going for a long time, but we think we can cherry pick what we think are the best loans'."
GCI expects to buy loans from other platforms, including Australian ones in future, but the local ones will need a lot longer track record before they do. 
Mr Sher said: "You can go and invest in loans on Society One, but in a sense you are doing it somewhat blind. Is it the right asset class, the right platform, the right price? Have you thought about the possible downside?" 
Assessing the platform itself was important in such a new area, he said. The loans last for several years, but many of the peer-to-peer lenders might not be around that long.
After starting with a simple marketplace where individual investors could lend directly to borrowers, the big peer-to-peer lenders are increasingly looking like traditional banks, with about half their funding coming from institutional and sophisticated investors and the rest from direct retail lenders, which are akin to depositors with banks.
Mr Sher said as well as private funds like theirs, Lending Club and Prosper got funds from regional banks and by securitising their loans, just as non-bank lenders have done for decades.
A large part of Australian peer-to-peer platforms' lenders are institutional. Society One and MoneyPlace both have banks and mutual lenders investing in personal loans with them.