The Next Safe Haven Asset Class Could Be Investing In Humans, Here’s Why

By certain metrics, it’s quite easily done… for all 7.5 billion of us, even if it may seem facetious to reduce human beings to a series of investment characteristics.

And raising new questions about what the future of investment might look like are a growing number of new start-ups seem to think that that’s possible.

It’s nothing new – investing in people. Since the earliest stages of commerce, we’ve been investing in people as a workforce. Relying almost solely on taking a gamble on an entrepreneur’s latest idea are early stage investing.

However, we could be about to enter new investment territory, suggests the emergence of new companies, which meld peer-to-peer lending with social impact investing.

A U.S. start-up which enables investors to provide postgraduate loans to international students for a profit – Prodigy Finance, is one example. While investors can make regular returns from their investment, ability to fund their education are international students – particularly those from emerging economies, who may not be eligible for a traditional loan.

However, the loan is assessed and approved based purely on human characteristics – namely intelligence with no physical assets to speak of.

“Students are assessed on their academic performance and anticipated earning potential,” Joel Frisch, head of business development at Prodigy Finance said.

In an effort to guarantee graduate salaries at the upper end of the earnings scale, currently loans are open only to MBA, law and engineering students. A 99.1 percent loan repayment rate has been reached by the company.

“Investors appreciate that there is a combination of social and financial return,” Frisch continued, “We give them the opportunity to invest in the future potential of a student.”

This marks a shift towards the way we will look to invest in the future and a departure from traditional investment, for Frisch.

“It’s the right direction to be going in,” he said. “From the perspective of investing in people, I think it’s very much the next stage.

“Version one was that concept of investing in socially responsible areas. Version two was looking at supporting the ‘good guys’.

“Impact investing 3.0 is where you’ll start to see the impact of investing in someone at an individual level.

“It’s very transparent. People say there’s not enough transparency in finance and I think we’re going to see continued movement into this area.”

Although they are invited to network and engage in future business ventures, Prodigy Finance does not require any direct relationship between investors and students.

However, could it pave the way for direct investments from person to person? Peer-to-peer lending for social improvement? This despite the fact that it is one of several businesses which aim to link investors with promising individuals via an intermediary or fund.

The approach to investing as having reached its third iteration: One which puts the individual at the forefront, is viewed by Chris Gledhill, founder of British challenger bank Secco, like Frisch.

“It’s like Television. First we had the BBC, then Sky, then YouTube. It moved from the state to corporate to individual and I think the same will happen with money and value,” Gledhill said.

To enable users to use their own individual digital currency to trade with people in their community is one of Secco’s intentions, when it goes through public beta testing this summer.

“The Secco app looks a bit like Pokémon Go and allows you to trade with others and give them credit for certain attributes,” said Gledhill. He further explained that this would attach value to non-financial assets and could range from specific expertise to social skills to fashion sense.

(Adapted from CNBC)

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s