Through the agreement, Pagaya's AI-powered consumer credit and residential real estate solutions will combine with Theorem's institutional fund management company, consumer credit funds, and technical skills.

Pagaya expects the deal to finalize in the fourth quarter of 2024.

"It is anticipated that the fund management business will grow to more than $3 billion of capital in investment vehicles separate from and incremental to the company's market-leading securitization program," according to the fintech, which announced the agreement.

It claims that this action is consistent with its goal to "improve capital efficiency and diversify its funding sources."

Theorem, which was established in 2014, specializes on post-trade data management for consumer credit, which includes combining position, balance, and transactional data from several counterparties.

In order to support its institutional fund investing strategies, the company develops and applies machine learning models for the purpose of analyzing, pricing, and assessing loan origination platforms.

Theorem will gain access to the Pagaya network's “unique investment sourcing flow” as a result of the agreement, according to Pagaya CEO Gal Krubiner, and the fintech will be able to “fully take advantage of the impressive machine learning investment technology that underlies Theorem’s private credit investment platform”.

Currently, Theorem oversees the management of more than $1.7 billion for family offices, insurance companies, sovereign wealth funds, endowments, foundations, and pensions throughout the globe.

Pagaya goes on to say that "credit assets generated by Pagaya’s network of 30 of the top lenders in the US, including over $180 billion of application volume per quarter" would now be available to investors in Theorem’s credit funds.

The purchase follows Pagaya's February 2018 acquisition of a $280 million credit facility sponsored by BlackRock.