Investing in peer-to-peer loans can offer less volatile annual earnings and a more steady income stream than funds and indices, LandlordInvest research has found.

The P2P lending platform’s analysis of its Innovative Finance ISA (IFISA) – to strip out any tax implications on earnings – found that it returned 64.45 per cent over the past five years, based on yearly average interest of 10.46 per cent, compounded annually.

Meanwhile, the Fundsmith Equity Fund – which can be held in a stocks and shares ISA wrapper – returned 72.4 per cent over the same period.

However, LandlordInvest also analysed the two investment products over the past three years and found that its IFISA returned 34.78 per cent, beating Fundsmith’s 28.32 per cent.

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It noted that the largest contribution to Fundsmith’s overall five-year earnings of 72.4 per cent came in a strong year more than three years ago, and would have been missed by more recent investors.

“A key difference to understand is that whilst profits (or losses) from funds and indices are derived from buying at one price and selling at another, investments in LandlordInvest loans pay monthly interest over the loan term with the principal amount being due at maturity,” the firm said. “This leads to less volatile year by year earnings and offers a steady income stream that most funds do not offer.”

Read more: LandlordInvest investors earned 12.41pc last year

LandlordInvest’s research also found that Vanguard’s global corporate bond index fund returned 2.59 per cent over the past five years, while Royal London’s corporate bond fund returned 11.43 per cent.

The FTSE 100 generated 8.22 per cent returns over the five-year period, while the S&P 500 returned 84.11 per cent.

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