Pagaya, a fintech firm which uses artificial intelligence to manage institutional money, has topped $1.2 billion in assets under management, on the heels of the close of $200 million in asset-backed securities in December.
“We have a team of data scientists and artificial intelligence specialists who are focused on analyzing the millions of data points that are available to understand these asset classes,” said Ed Mallon, chief investment officer at Pagaya.
Pagaya focuses on data-rich alternative assets, and its clients are institutional investors, including high-net-worth investors, sovereign wealth funds, pension funds, insurance companies and foundations. The company’s clients include Meritav Dash Provident and Pension Funds, Clal Pension & Provident Funds, Phoenix Provident and Pension Funds and Bank Leumi.
Mallon explained that Pagaya is using AI to change the way asset management is carried out, a field that’s been dependent on linear regression models for decades.
“The limitation historically has been that when you’re using linear regression, you have to focus in on a limited number of parameters to analyze the risk,” noted Mallon. “With AI, we can be a little bit more precise, and incorporate more information into the analysis, and ultimately, translate into what we think are better and more interesting risk-adjusted returns.”
2019 was characterized by the company as a milestone year, in which Pagaya increased its origination 300% in 12 months. The company projects that its opportunity pipeline is expected to reach $500 million per month at the end of 2020. Pagaya began in the unsecured consumer lending space; it’s since expanded to real estate, both in debt and equity. Looking ahead, the company is researching the auto finance asset space.
The net effect for clients using Pagaya’s tools, according to Mallon, is the unlocking of a new asset class along with stable and predictable returns in their portfolios. Pagaya sees its competitors as legacy institutions that manage institutional investments instead of upstart fintech companies, a nod to the nasceny of AI-supported asset management.
Pagaya has so far raised $45 million in equity funding, including a $25 million Series C round in April 2019 led by Oak HC/FT, a healthcare and fintech venture capital firm. The New York and Tel Aviv-based company has so far issued five securitizations, and in 2019 doubled its team to 84 employees. Mallon, who joined Pagaya as chief investment officer in 2018, is a 20-year veteran of BlackRock.
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