Are High-Net-Worth Preferences Changing?

LADERA RANCH, CA—Savvy high-net-worth investors like to be insulated from short-term trends up or down, Money360’s SVP, investor relations, Laura Catalino tells GlobeSt.com. After her recent appointment to her new position at the peer-to-peer commercial real estate lending platform, we spoke exclusively with Catalino about what the firm does, her goals in her new role and trends she is noticing with high-net-worth investors.

GlobeSt.com: Would you tell us a little about Money360, for those who may not be familiar with the company?

Catalino: Sure. Money360 is a peer-to-peer/online marketplace lender that directly connects commercial real estate borrowers with accredited investors. The company essentially pioneered P2P lending for commercial real estate loans and has created a state-of-the-art online marketplace that enables people to invest in either part or all of a commercial real estate deal. Because of this direct connection between borrowers and investors, it allows for greater efficiency and transparency. This results in better returns for investors (their investments typically yield 8% to 11% and are secured in a first-lien position at 60% to 70% loan to value) and reasonable terms for the borrower—which, as you can imagine, has made the company an attractive investing option to both high-net-worth and institutional investors.

GlobeSt.com: What are your goals in your new role with Money360?

Catalino: I want to increase awareness of peer-to-peer lending, educate those who are new to the space and assist investors in quickly reinvesting maturing assets. I also want to increase Money 360’s presence among high-net-worth investors, who have similar needs and goals to institutional investors. Many of the high-net-worth individuals I have dealt with are very sophisticated in their understanding of money management and regard real estate-backed loans as an attractive segment of their portfolios.

GlobeSt.com: What trends are you noticing with high-net-worth investors? What are they looking for in real estate, and what are they avoiding?

Catalino: This is an interesting question because it touches on two key points. First, what is happening in the real estate market—and for us at Money360 that really means the commercial real estate market because we don’t get involved in residential real estate loans. As GlobeSt.com’s audience is aware, the real estate market is enjoying a strong recovery in many areas of the country.

The second part of your question, about how high-net-worth investors are responding to these changes in the market, is especially interesting. Savvy investors like to be insulated from short-term trends up or down, and the loans on our platform fit that requirement. We lend on assets where the borrower’s equity is 30% to 45% of the value, and our loans are generally for one to three years. Our investors know from day one the interest rate they will receive during the term of their investments. And the market would have to really crater before our investors would be at risk. For the portion of their portfolios that is placed with Money360, they are highly insulated from market trends.

GlobeSt.com: How are high-net-worth investors’ preferences changing as the economy continues to expand?

Catalino: In my experience, high-net-worth investors typically take a long-term, strategic approach to managing their portfolios. They establish criteria for diversification by asset class and risk profile and generally stick with their strategy. The continuing economic rebound from the 2007-2008 recession has had an effect, but that’s most visible in the increasing amount of cash that high-net-worth investors have available. They are not likely to change their investing approach dramatically, but they do have more cash that they have to put to work. One of the benefits of a platform such as Money360 is that the process is no different whether you are investing $50,000 or $5 million. That’s attractive to an investor who has an increased amount of cash to deploy.

GlobeSt.com: What else should our readers know about high-net-worth investors?

Catalino: High-net-worth investors typically are strong believers in not putting all of their eggs in one basket, as the old saying goes. They tend to spread their investment dollars across many asset classes, multiple levels of risk and often among several advisors and service providers. In fact, many of the successful investors with whom I’ve worked focus more on keeping their money working than on chasing the highest possible return on their money. A package of loans that promises a 13% return looks great, but it’s a lot less attractive if those loans have a 5% default rate. Similarly, they reinvest their cash as quickly as possible, 9% today is the same as waiting two to three months for a 12% deal.

By comparison, some investors are yield hungry; they chase investments that offer exceptional returns. You generally won’t find high-net-worth investors doing that. They have a strategy that aims for diversification, preservation of capital and attractive yields, and they don’t sweat a point or two in return.