Normally, making a steep investment in an emerging marketplace isn’t a slam dunk, or even completely prudent.
Joseph Besecker doesn’t see it that way in this case. The president and CEO of Manheim Township-based investment adviser company Emerald Asset Management Inc. calls his company’s recent acquisition of investment company Direct Lending Capital LLC an opportunity he believes is almost guaranteed to pay.
While Besecker isn’t permitted to say how much the company spent to acquire the peer-to-peer lending company — a contingency of the sale was not to disclose the price — he can say the investment is “substantial” on his part, and he fully believes the technology and the potential of the marketplace will make the purchase a success.
“This is the early innings of what is going to be a very big game,” Besecker said this week at the Lancaster company’s offices. “It’s something that gives investors a new opportunity in alternative investing.”
Direct lending — often referred to as peer-to-peer lending — gives people looking for credit a different avenue to obtain it. It’s a way of cutting out the middleman — in this case, banks — in getting money to people who have a very good credit history but may have been squeezed out by the traditional banking system because of new regulations or bank policies.
Direct Lending LLC, based in Oceanside, Calif., doesn’t make the loans but buys the peer-to-peer loans that are given out to credit-seekers. As a part of Emerald now, Emerald will buy those loans it finds to be safe credit investments for its client portfolios.
The new division, Emerald Direct Lending Advisers, currently is not taking on new investments while it finalizes the paperwork associated with the acquisition. By the end of the month, however, company officials said, they hope to be soliciting new investors.
Howard Freedland, the chief investment officer with Direct Lending and now a principal with Emerald, said that in peer-to-peer lending, only about 10 percent of applicants are approved and loans are given only to those with prime and super-prime credit histories.
Freedland explained the peer-to-peer lending industry as an evolution, much like the evolution of the record or book industry.
“People still read books, they still listen to music,” he said. “They just don’t buy them the same way they did 20 years ago.”
Besecker founded Emerald in 1991 and has grown it to a asset management company handling nearly $3 billion for investors in small and mid-capital, pension funds and other sources.