MoneySQ and Bridgeway team up to form Hong Kong’s first crowdfunding platform for professional investors

PUBLISHED : Tuesday, 08 March, 2016, 2:10pm
UPDATED : Tuesday, 08 March, 2016, 2:10pm

A peer-to-peer lending company in Hong Kong has partnered with an asset management firm to create what they claim is the city’s first investment platform designed for professional investors.

MoneySQ.com formed an allegiance with Bridgeway Prime Shop Fund Management Ltd to create the online lending service, which will be able to operate under current regulations.

The partnership comes as a government report on the growing financial technology (fintech) sector released at the end of February took steps to clarify the legal standing for peer-to-peer lenders and suggested schemes limited to professional investors would be permitted.

“For the government, it’s quite hard for them to say ‘yes’ [to such lending]. They’re afraid if people lose money, they’ll just go to the government [to complain],” said Steven Lee, founder of MoneySQ.com.

He said such forms of lending are considered “too risky” by retirees, and that the company began looking to service professional investors from last year.

The Steering Group on Financial Technologies, a body set up in March 2015 to advise the Hong Kong government on fintech development, issued a report stating that “subject to compliance with SFO [Securities and Futures Ordinance] licensing, authorisation and other relevant regulatory requirements... offers limited to professional investors may benefit from certain exemptions.”

Crowdfunding and peer-to-peer lending in Hong Kong fall under the SFO as well as the Companies (Winding Up and Miscellaneous Provisions) Ordinance.

The former places restrictions on inviting the public to purchase shares, debt instruments or on joining collective investment schemes.

Fintech and related start-ups in Hong Kong have seen growing government support over the past few years, yet critics claim regulation has not kept pace with innovations in the field.

To avoid regulatory issues, MoneySQ.com will work with Bridgeway, which holds a Type 9 license (asset management) that allows it to operate a collective investment scheme and accept funding from professional investors.

The professional investors Bridgeway works with are defined as individuals with HK$8 million (US$1.03 million) in liquid assets or a partnership, trust or corporate with a portfolio worth over this amount.

Edwin Lee, founder and chief executive of Bridgeway, is hoping to attract some of the 130,000 professional investors in Hong Kong who hold HK$5.5 trillion in assets, of which 23 per cent is held in cash or equivalents. The statistics come from a 2015 report by Capgemini.

The Bridgeway founder - and brother of Steven Lee - said peer-to-peer lending offers investors an alternative to the stock or bond markets, and that through this partnership investors will be guaranteed a return of over 5 per cent.

“You read that the historical performance [for stocks and bonds] has not been very good, so for them, rather than putting the money in the bank, there is an alternative and they can put it on our platform, and we offer a guaranteed return,” he said.

Bridgeway said it will raise HK$100 million to HK$200 million in the next two months.

Steven Lee said the lender is targeting 10,000 members in the first year with loan sizes ranging from HK$5,000 to HK$100,000. This adds up to a total target lending amount ranging from HK$500 million to HK$1 billion.

As a first step, professional investors will be allowed to invest indirectly with a guaranteed return. After they become more familiar with peer-to-peer lending, they will be allowed to select their investments depending on the desired return and their appetite for risk, Steven Lee said.

MoneySQ.com is working with credit information firm TransUnion to adopt its risk-control system and will only accept “high quality” investors, it said.

Borrowers will be able to apply online and receive their loans within an hour, Steven Lee said.