SoFi, the online lender that raised a $1 billion round at a valuation of $3.6 billion last August, has announced the launch of its own hedge fund to offset slowing growth patterns plaguing the marketplace lending industry. After several years of success for startups within the space (Prosper Marketplace, Avant and LendUp, among others), the industry has hit a rough patch as market volatility is causing investors that purchase these companies' packaged loans to back off.
SoFi's public competitor LendingClub (NYSE: LC) has seen its stock price plummet from nearly $26 per share down to under $9 in just about one year. SoFi's hedge fund, called SoFi Credit Opportunities Fund, aims to help counteract this wariness and help support the market for its own loans.
Online lenders have received more than $3.9 billion of VC investment in the past five years, according to the PitchBook Platform, including a total of over $1.8 billion in 2015 alone. This year has already seen two funding rounds raised of $150 million or more (LendUp and WeLab) as companies move into the later stages. These companies are beginning to come under more federal scrutiny, however, as the sector has been loosely regulated thus far. Regulators are looking into the industry to make sure it complies with U.S. state and federal laws followed by larger banks.
Click here for more data on VC investment in the online lending space.