Tuesday, February 10, 2009

Pertuity Direct--Social Lending Meets Mutual Funds

Following my review of Pertuity Direct and Tom’s announcement of the official launch, PLR was contacted by the PR team at Pertuity Direct for an interview, and I was fortunate enough to talk with their management team including CEO Kim Muhota and Charlie Schliebs who is an independent board member for the National Retail Fund, which holds Pertuity’s funds. Also on the call was Lisa Lough, SVP of marketing for Pertuity, Inc.

As we mentioned before, this team has experience and credentials to spare, but their energy for their business model is also extraordinarily contagious. My prediction is that the combination of this energy, the security of their mutual fund-style of social lending and the precipitous failing of traditional lending is going to serve Pertuity well in the near future.

We’ve recently covered them, so I’ll keep this post short and focus on the new items that I’ve learned and a brief futuring discussion that I had with Kim and Charlie who indulged my interest in their version of what the future of social banking may hold.

For Lenders: Pertuity Direct is “social lending interval fund,” where lenders buy into a risk-classed pool of borrowers. Two pools are available now via the National Retail Fund for, but others are planned for the future. An advantage to the mutual fund approach is liquidity in your assets. You don’t have to wait a 3 year loan term to get your money back. One disadvantage is slightly higher maintenance fees, right now at about 3.17%. (I’m not sure how this offsets with the default rates in traditional P2P loans, so if anyone has thoughts on this, I’d love to hear them). Pertuity Direct requires a minimum investment of $250 USD, and you’ll experience a small fee if you withdraw before one year in the fund.

For borrowers there are several advantages. First, you don’t have to spill your financial guts or upload a glamour shot to get funded. Nobody will take your spelling into account in funding your loan (I’m guilty of this with my Lending Club account). Borrowing on Pertuity Direct doesn’t feel like running for Prom Queen in high school. You will know what interest rate and terms you’ll be offered and you can take it or leave it. Your loan will be approved or not, and funded within three days, just like a bank. The process is simple, familiar and respectful of your privacy.

Muhota has had a long time to stew on this plan. He first formed his idea seven years ago and has followed the trends. Plans for launch went on hold as they decided how best to comply with SEC regulations to ensure a secure product and legal compliance on all sides, and they launched PertuityDirect.com on January 22, 2009.

When I asked Kim Muhota and Charlie Schliebs about the prospects for long-term social finance, their energy level became even higher. They agreed that many people are loosing faith in traditional banking, and expecting more from their money. When I asked what the near future may hold for Pertuity, Muhota explained that they’re looking into shorter and longer term products for borrowers. I pressed further and asked if that might include “social” mortgages and revolving lines like credit cards. He replied “absolutely” elaborating that consumers and lenders alike are going to be drawn increasingly to the low overhead, lack of what he called “legacy costs” and the growing uncertainty of traditional banking.

I’d have to agree. Why have your money buying some Bank MBA’s Bentley when you could have it working for you in a high yield, responsibly managed product that comes equipped with all of the institutional rigors of a traditional banking product?

Special thanks to Pertuity Direct’s team for spending some time with me this week.

Jessica Ward is a freelance writer based in the Seattle area.


Tom said...

I think Pertuity Direct picked a perfect time to launch. Lending Club is their only real competitor right now since Prosper is still closed.

Good on PD for getting the SEC blessing. That certainly seems to be hard to do right now.

小橋川 純苔 said...

I know it's probably a little young, but it would be really nice if they had a statistics page like lendingclub and prosper.

Jamie said...

My understanding is that PD operates in 37 states, but it apparently doesn't operate in Virginia, Delaware, or California. Is there somewhere that I can find a list of states in which it does operate?

Tom said...

Good question. The only thing I can find in the legal agreement is "In addition, not all products and services will be available to residents in all states."

Perhaps you have to contact them directly.