Pagaya raises $25 million to manage asset-backed securities with AI

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Pagaya Investments, an AI-driven institutional asset manager that focuses on fixed income and consumer credit markets, today announced that it has raised $25 million in series C funding led by Oak HC/FT. The round — which saw Viola Ventures, Clal Insurance, GF Investments, Siam Commercial Bank’s Digital Ventures, and former chairman and CEO of American Express and Pagaya board member Harvey Golub participate — brings the New York and Tel Aviv startup’s total raised to $119.3, according to Crunchbase, following an earlier $20 million venture capital round and $75 million in debt financing.

CEO Gal Krubiner said the cash infusion will fuel development of its technology and enable Pagaya to pursue real estate and other fixed-income assets like auto loans, mortgages, and corporate credit, and to expand its engineering team of about 20 data scientists and AI specialists. “We’re thrilled to have the continued support of our investors. We are seeing the amazing potential of AI to disrupt asset management, and this capital will accelerate our effort,” he said. “[Pagaya] provide[s] cutting-edge opportunities to our partners, paving the way for practical uses of AI in the … market, [and we] look forward to creating more opportunities like this in the future [and] to driving the adoption of AI in traditional finance.”

Pagaya was founded in 2016 by CTO Avital Pardo, a former Fundbox data scientist and Israel Defense Forces senior analyst; Krubiner, who’s held various roles at Deutsche Bank; and Yahav Yulzari, the owner of real estate development company Galya Global.  The trio sought to apply machine intelligence to securitization — the conversion of an asset (usually a loan) into marketable securities (like mortgage-backed securities) that are sold to other investors — and loan collateralization.

Toward that end, Pagaya eschews the traditional method of securitizing pools of previously assembled asset-backed securities (ABS) for a more bespoke approach. It employs AI to select and buy individual loans by analyzing emerging alternative asset classes, assessing their risk, and drawing on “millions” of signals to predict their returns.

In February, Pagaya announced that it was issuing and overseeing $100 million in actively managed ABS led by structuring agent Cantor Fitzgerald, which brought its total assets under management to $450 million. It’s targeting close to $1 billion in managed assets by year-end, and counts Israeli banks Hapoalim and Leumi, European banks and Israeli insurers, and Citi among its customers.

“We’ve seen first-hand what the Pagaya team can accomplish,” said Dan Petrozzo, venture partner at Oak HC/FT and a veteran of Goldman Sachs and Fidelity Investments. “Institutions looking for stable investment solutions with higher returns will continue to turn to Pagaya as there is just no one else creating comparable opportunities.”

Source: VentureBeat

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