Fintech Pagaya Places $ 100 Million Consumer Loan ABS Managed by AI

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Fintech startup Pagaya Investments said it has privately placed a consumer loan securitization that will rely solely on artificial intelligence rather than human judgment to manage and operate its first $ 100 million portfolio.

Pagaya announced on Wednesday that the new securitization platform will use its proprietary AI’s big data analytics engine to actively manage the transaction, including the trading, buying and selling of assets acquired from originators. of undisclosed online loans.

Pagaya chief executive and co-founder Gal Krubiner said in a company statement that the company sees the new agreement as a demonstration of “practical uses of AI in the ABS market” and a means to ” foster the adoption of AI in traditional finance “. ”

“We are only a few years away from all Secured Loan Bonds (CLOs), Mortgage Backed Securities (MBS) and ABS managed by AI,” Krubiner said in the release.

The institutional asset management specialist had purchased the unsecured online loan assets during a ramp-up phase by the same means, using the same big data analytics technology,

The AI ​​platform analyzed, selected and acquired the loans through a direct interface with the computer systems of its online lending partners, using approximately 1,500 data metric parameters, Krubiner said. Asset securitization report.

Each loan was purchased individually, rather than in bulk or in pools of structured loan offers by the lenders themselves. The collateral was increased over a period of several months, much like in a CLO portfolio arrangement, according to Krubiner.

“We’re like a CLO manager, just in consumer credit,” he said in an interview.

Although the AI ​​system is the prime contractor, the company says that “qualitative oversight” of the portfolio will be maintained by an investment team of data scientists and AI specialists led by the chief executive officer. Ed Mallon investments, a former managing director of BlackRock in opportunistic investments. .

The securitized portfolio consists of blue chip loans, with typical balances of around $ 10,000 and APRs of 13-16%, Krubiner said.

The loans support a private issuance of notes and unrated equity to institutional investors, hedge funds and undisclosed fund managers through structuring agent Cantor Fitzgerald.

Krubiner said the company plans to expand its $ 450 million in assets under management to $ 1 billion by the end of the year using the AI ​​system.

Pagaya also plans to adapt the technology to other asset classes in the coming years, he said, including CLOs and mortgage-backed securities, according to Krubiner.

Pagaya, founded in 2016, has raised nearly $ 100 million in seed capital through venture capital and debt financing through Citigroup to fund its machine learning and big data analytics technology.

The company has offices in New York and Tel Aviv, and its customer base includes Citi as well as banks and insurers in Israel and Europe.


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