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    • agent69
    • By agent69 3rd Sep 17, 4:15 PM
    • 182 Posts
    • 88 Thanks
    agent69
    Could Ratesetter cover such withdrawals
    Originally posted by aroominyork
    They don't have to.

    One of the risks of lending in the short term markets is that if the sticky brown stuff hits the fan you might have to wait 5 years to get your money back.
    • bigadaj
    • By bigadaj 3rd Sep 17, 5:58 PM
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    bigadaj
    From my experiences of speaking with financial advisers about the asset class, around 3-5% allocation is comfortable. Sure, there's a lot of self-directed investors who are comfortable with greater exposure within their portfolio, but I think for those who see P2P as a passive investment and perhaps don't have the time or inclination to regularly learn or monitor their investment(s) then 5-10% makes sense.

    I think the typical investor journey is start very low, monitor , then increase exposure. I think what is important to remember, however is that borrowers are not likely to default in say their 1st year of a 5-year term, so default rates forecast while some open loans are in their infancy need to be taken with a pinch of salt. Increasing exposure too quickly could be risky.
    Originally posted by Jordan Stodart
    Interesting, it's not an asset class that you'd associate with financial advisers. If it's being used as a bond proxy then a 3-5% allocation is questionable as to whether it is actually worthwhile, particularly with rebalancing.

    The other point being missed is that talking about p2p as if it is one thing is like talking about equities or bonds in the same manner.

    Returns on p2p can vary from 2% to 15% on a huge range of risks, from fully secured to unsecured with low credit rating borrowers, and across businesses and individuals.

    The odd thing is that most of the higher return element is frequently if the secured and better risk with lower loan to value. The lower return unsecured element frequently has some form of provision fund or similar, but that wouldn't be sufficient to cover large scale losses.

    I'm currently at 2-3% of net worth and looking to increase to maybe 5% over the next few months. I could see myself getting to 10% or even a little higher but couldn't see it becoming a lot higher than that.
    • aroominyork
    • By aroominyork 3rd Sep 17, 6:51 PM
    • 185 Posts
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    aroominyork
    One of the risks of lending in the short term markets is that if the sticky brown stuff hits the fan you might have to wait 5 years to get your money back.
    Originally posted by agent69
    My understanding is that investors who are lending on rolling loans can always withdraw immediately. It is only one and five years fixed term loans where selling out is dependent on finding a replacement investor. Is that correct? If it is correct, I would like to understand what might happen if a huge number of rolling lenders simultaneously wanted to withdraw their funds. Could Ratesetter cover such withdrawals and if so how, and what might the knock-on effect be to interest and capital provision fund coverage of fixed term loans (it is one year loans I am interested in making)?
  • jamesd
    I wouldn't have said that's a valid comparator though, even if it is an easy option. ... A poster would be rightly ridiculed for suggesting 100% investment in the ftse all share, so I don't see why that would be a suitable benchmark. ... Comparison with say the world index in dollars might be better
    Originally posted by bigadaj
    Since I was substituting P2P for UK gilts/bonds you could as easily pick a UK gilt or bond index instead of the FTSE, that being most comparable to where it'd have traditionally gone. Still, since I have quite a bit in a GBP-hedged global tracker ETF at the moment, IGWD, in 2016 its after-hedge and charges GBP performance was +8.07%. Vs 16.75% for the FTSE All Share Index total return before charges. Year to date IGWD is up 8.84% and it'll be 13.2% if that performance continues for the rest of the year.

    I'm not sure whether you beat a poor comparator with one p2p platform is particularly relevant either, it's a bit like one of my funds or shares has done well and the rest have been mediocre or worse.
    Originally posted by bigadaj
    Substituting a hedged global tracker made the target much easier to beat in 2016 than the FTSE100 you criticised me for using. I don't think my P2P investments anywhere did less well than +8.07% in 2016. I don't have easy access to 2015 or 2014 calendar years or I'd have given them as well, feel free to if you can find them.

    surely if you are a follower of cape then a suitable, alternative would be to adjust your investment strategy to favour those markets which appear to offer better value
    Originally posted by bigadaj
    I could try but since I had a lot in cash for much of 2016 and also much in European and UK smaller companies it's not very easy to pick an alternative equity comparator based on my shifting much of my money out of the high-CAPE US market. Similar to the FTSE is decent enough, since the cash did less well and the small caps did much better and i didn't have beating equities as my objective. Given where my equity money is currently invested it'll be very challenging for P2P to match it if its performance continues: lots of smaller companies (UK, EU and global), emerging markets and Asia-Pacific and much less in global trackers or cash.
    Last edited by jamesd; 04-09-2017 at 2:45 AM.
  • jamesd
    With P2P defaults are a certainty, of course you could be lucky enough to not be invested in the ones that default or get at least your capital back if you do. However, if they dont default the fact that a 12% return doubles your money every 6 years is a massive attraction
    Originally posted by Drp8713
    Ablrate estimates 1% loss to bad debt after security is taken and sold, I normally suggest 2% and 12% raw interest rate though my own mean raw interest rate is normally higher there. 11% or 10% still double your money pretty quickly.

    I have about £20k in the markets in comparison, but if my returns stay above 12% and P2P survives the next financial crisis then I would have to consider increasing my S&S /P2P ratio.
    Originally posted by Drp8713
    It's pretty unlikely that P2P will do as badly as a big equity drop, that's 40% and even more routine ones of 20% are worse than anything you can expect from the sort of P2P lending recommended by posters here, which are very unlikely to go to negative returns. My view is it's better to be in P2P before the equity drop then sell the P2P and buy the equities cheaper after it.
  • jamesd
    Do you anticipate increasing investment in existing P2P providers, or are you going to continue diversifying across multiple platforms?
    Originally posted by Jordan Stodart
    I'm doing some of each, partly based on tax effects - notably ISA availability - anticipated returns and the extent to which I can manage liquidity rather than relying on the chance of favourable supply-demand balance at the platform. In general I expect £50-120k each at three main platforms and smaller amounts elsewhere, either due to me running off lending at them (Zopa, Bondora), limited loan availability or returns. I have accounts at seven platforms at the moment.

    Ablrate is likely to be the platform that has the highest proportion of my money. DBW has repeatedly demonstrated that he'll try to do the right thing, and handles pre-loan disclosures, mistakes and debt collection well. Definitely not perfect and I could do chapter and verse on the platform's imperfections, but always trying to do the right thing when the inevitable problems happen. That's a critical attribute that I want to see demonstrated in platform senior management. EP at MoneyThing also scores very well on that measure, just a less attractive overall platform proposal at the moment (fixed price resale market so I have minimal liquidity control, no ISA).

    Most recently I took a 4% cashback deal on about 50k in one loan at Collateral as my first investment there. That's well above my typical per-loan exposure but I thought it worthwhile given the potential return, likely to be about 2% a month for the time the part I sell is held. Given that level of investment you can tell I was pretty comfortable with Collateral before I first stepped in there.

    I don't mind going to 25k or so if the deal seems to merit it, though I'd be looking to reduce that over time. A few k for a typical 12% loan is about right for me.

    It isn't chance that the three platforms I just mentioned don't have much in the way of bot activity, though Collateral is inadequate for my taste at the moment, just not sufficiently inadequate. That's a major turn-off for me. I want to see platforms designed so that bots (and client-side automation in general) can't deliver a meaningful level of reward for the operator vs the general investor population. The same applies to institutional money, if it can cherry-pick, that's a major negative factor.

    How would a one-click solution platform that offered portfolios with multiple P2P providers included in them sound to you?
    Originally posted by Jordan Stodart
    I think I'd find its charges an unpalatable drain on total returns and its investment selection undesirable compared to where I invest, a further drain on comparative total returns. If it's going to invest large chunks in the likes of Zopa, RateSetter and Funding Circle it's going to take quite a performance hit, but its liquidity concerns may force that choice. I'm not very likely to be a customer if I anticipate returns after bad debt and charges before tax below 10% and given the ISA availability trends that's rising towards 10% after tax as a threshold.

    The concept is nice, I just think that the real world execution constraints will make it unattractive for me. I do think that there's significant demand for a black box product, though, just that I'm not likely to be the right customer.

    Some of the lowest rate P2P investing I've done in the past five years was at about 8% at Zopa, about five years ago, and nothing that low since then. Just no need for me to do it, I have choices that look better, and sufficient time to do the required work.
    Last edited by jamesd; 04-09-2017 at 2:39 AM.
  • jamesd
    I think what is important to remember, however is that borrowers are not likely to default in say their 1st year of a 5-year term, so default rates forecast while some open loans are in their infancy need to be taken with a pinch of salt.
    Originally posted by Jordan Stodart
    Depends on the P2P loans. For unsecured consumer credit lending the default rates as a percentage of loans made start high and decrease over time, peak rate depending on the particular mix but about a year into the loan is about right. Based on Zopa and Bondora experience and analysis mainly, both mostly for five year loans.

    Total number and value of defaults increases over time for a few years until collections start to overcome the ongoing new defaults. Maybe three or four years into a five year loan portfolio for the total defaulted balance to start dropping.

    For places like Zopa and RateSetter with no protection fund I might expect negative returns after bad debt (deducting whole capital balance at time of default) for four to five years at current interest rates without a protection fund to do time transformation on the debt collection activity.

    I think Zopa made a mistake dropping their protection fund, given that its value to lenders is higher at lower interest rates and higher default rates, both trends that have been evident in its lending as it's moved its proposition overall up the risk scale.

    A protection fund is also a highly desirable feature for pension investing. Even more so after crystallisation when you are prohibited by law from moving only part of a crystallised pension pot. Having £5 of defaulted loans in a ten year individual voluntary arrangement locking £300k somewhere would be a massive turn-off. I want to do P2P investing with a crystallised pension pot but a good solution to this at the platform level or a change in the law to allow splitting (and combining would be nice as well) seems to be necessary.

    Secured lending has a different profile, in part because of the risk to the lender of loss of the security, which tends to push the defaults later in time. Pawn similarly differs, I assume with a relatively high no payback at maturity level, whenever that is, and nil before then.
    Last edited by jamesd; 04-09-2017 at 3:19 AM.
  • jamesd
    The key issue that makes me limit my investment in Ratesetter is not the risk of defaults, but the possibility of some event leading to a huge number of rolling lenders simultaneously withdrawing their funds, which they can do without notice. Could Ratesetter cover such withdrawals and if so how, and what might the knock-on effect be to interest and capital provision fund coverage of fixed term loans?
    Originally posted by aroominyork
    My understanding is that investors who are lending on rolling loans can always withdraw immediately. It is only one and five years fixed term loans where selling out is dependent on finding a replacement investor. Is that correct? If it is correct, I would like to understand what might happen if a huge number of rolling lenders simultaneously wanted to withdraw their funds. Could Ratesetter cover such withdrawals and if so how, and what might the knock-on effect be to interest and capital provision fund coverage of fixed term loans (it is one year loans I am interested in making)?
    Originally posted by aroominyork
    If you check the actual contracts you are likely to find that RateSetter is not obliged to provide you your money if it can't find replacement lenders. As they say about Access "we cannot guarantee that you will always be able to access your money. If we cannot find other funds in our market to match to your loans, you would need to wait until new money comes into the market or wait until the borrowers pay you back in the normal course of events". The mixture of loans your money is in could end up being the time it takes you to get your money back. Rolling does have quite a high concentration in loans with one year and less maturity, though, at least last time I saw a description of how it invests the money, but "Your money will be invested in loan terms between 6 months and 5 years".

    No P2P platform and no P2P protection fund is likely to provide you guaranteed liquidity or guaranteed absence of capital loss, however good a job they do of emulating it in the short term and so far.

    If there was a substantial threat of a liquidity crunch you would probably see RateSetter try to manage it by increasing its advertising spend to attract new lenders. If that appeared to be insufficient they would probably try to further manage it by decreasing new lending.
    Last edited by jamesd; 04-09-2017 at 3:15 AM.
    • Ash Pole
    • By Ash Pole 4th Sep 17, 7:06 AM
    • 66 Posts
    • 5 Thanks
    Ash Pole
    Ratesetter hitting 7.5% today on 5 year loans for those who fancy it
    Originally posted by Brunnen-G
    Where are you seeing this? On the rate trends page the highest 5 year that I can see matched is 6.0% on 1st Sept.
    • aroominyork
    • By aroominyork 4th Sep 17, 8:26 AM
    • 185 Posts
    • 29 Thanks
    aroominyork
    Where are you seeing this? On the rate trends page the highest 5 year that I can see matched is 6.0% on 1st Sept.
    Originally posted by Ash Pole
    The graph shows trends, not each minute-to-minute or even hour-to-hour peak or trough.
    • aroominyork
    • By aroominyork 4th Sep 17, 9:47 AM
    • 185 Posts
    • 29 Thanks
    aroominyork
    If you check the actual contracts you are likely to find that RateSetter is not obliged to provide you your money if it can't find replacement lenders.
    Originally posted by jamesd
    Yes, that's right. What I confused was that there is no sell out charge for rolling contracts. You are right that for rolling as with 1 year and 5 year contracts, there has to be liquidity/replacement loans available.
    • bigadaj
    • By bigadaj 4th Sep 17, 7:20 PM
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    bigadaj
    Since I was substituting P2P for UK gilts/bonds you could as easily pick a UK gilt or bond index instead of the FTSE, that being most comparable to where it'd have traditionally gone. Still, since I have quite a bit in a GBP-hedged global tracker ETF at the moment, IGWD, in 2016 its after-hedge and charges GBP performance was +8.07%. Vs 16.75% for the FTSE All Share Index total return before charges. Year to date IGWD is up 8.84% and it'll be 13.2% if that performance continues for the rest of the year.

    Substituting a hedged global tracker made the target much easier to beat in 2016 than the FTSE100 you criticised me for using. I don't think my P2P investments anywhere did less well than +8.07% in 2016. I don't have easy access to 2015 or 2014 calendar years or I'd have given them as well, feel free to if you can find them.

    I could try but since I had a lot in cash for much of 2016 and also much in European and UK smaller companies it's not very easy to pick an alternative equity comparator based on my shifting much of my money out of the high-CAPE US market. Similar to the FTSE is decent enough, since the cash did less well and the small caps did much better and i didn't have beating equities as my objective. Given where my equity money is currently invested it'll be very challenging for P2P to match it if its performance continues: lots of smaller companies (UK, EU and global), emerging markets and Asia-Pacific and much less in global trackers or cash.
    Originally posted by jamesd
    Fair enough, I was concerned about the comparator you suggested, like you say there are different approaches and options. I wasn't suggesting that you were selecting favourably, just not necessarily appropriately.

    I do have some concerns over p2p defaults as the economy potentially stagnates, given that substantial investments or even simple diversification requires a fair percentage to go into property related loans, whether bridging or development.

    Valuation reports are often questionable and trying to successfully hold a valuer to account is a challenge to say the least.

    We've had a very good decade in terms of investors that are prepared to put their money into higher risk asset classes, be that debt, equities, p2p etc

    I think some of the defaults on secured property could return less than the capital values quoted, so investors maybe getting back half of their capital. In that case being unlucky on a small number of loans with large investments could be painful and well above the postulated 1-2% default rate.
    • Ash Pole
    • By Ash Pole 4th Sep 17, 8:47 PM
    • 66 Posts
    • 5 Thanks
    Ash Pole
    The graph shows trends, not each minute-to-minute or even hour-to-hour peak or trough.
    Originally posted by aroominyork
    I'm not doubting it happened, I'm asking where you can find this information on the website. Is there a list of matched amounts somewhere? I've always found the ratetrends page unsatisfying.
    • Jordan Stodart
    • By Jordan Stodart 5th Sep 17, 9:21 AM
    • 11 Posts
    • 2 Thanks
    Jordan Stodart
    Interesting, it's not an asset class that you'd associate with financial advisers. If it's being used as a bond proxy then a 3-5% allocation is questionable as to whether it is actually worthwhile, particularly with rebalancing.
    Originally posted by bigadaj
    From my experience in the asset class - particularly in trying to bridge the gap between platforms and advisers - advisers, for the most part, are open to P2P and could see it as a fixed income replacement or even a cash plus product...the real issue comes in placing P2P on a risk scale and conducting suitability. There's definitely more to be done, but there is appetite, especially when yield without volatility is hard to come by.
    • bigadaj
    • By bigadaj 5th Sep 17, 6:14 PM
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    bigadaj
    From my experience in the asset class - particularly in trying to bridge the gap between platforms and advisers - advisers, for the most part, are open to P2P and could see it as a fixed income replacement or even a cash plus product...the real issue comes in placing P2P on a risk scale and conducting suitability. There's definitely more to be done, but there is appetite, especially when yield without volatility is hard to come by.
    Originally posted by Jordan Stodart
    Yes, it's just not an asset class that you'd associate with an ifa, no reason for them to exclude it. Advisers suggest equities and bonds, maybe commodities or possibly structured products. Property, p2p and other more bespoke options I'd tend to associate with them less.

    That obviously depends on the nature of the investment, it would be unusual for an ifa to recommend some esoteric equity products as the justification would be difficult to achieve, whereas investments in reits or physical property funds are adviser products potentially.

    In that manner I'd think successful p2p would be difficult for an adviser, or at least what I'd consider it to be so. Platforms like Zopa or Ratesetter are straightforward but for me they offer to low a rate of return for the risk you're taking on. Alternatively soem slightly higher risk platforms offer better returns but still put loans into baskets and have higher default rates. I'm only in, and would probably consider, secured loans offering over 10% returns, and even then each loan has to be scrutinised and determined whether acceptable, that would be too much work for an adviser, including the need for diversification and the fact that loans are frequently short term.
    • justme111
    • By justme111 5th Sep 17, 9:33 PM
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    justme111
    The hourly rate of an adviser would be justified my be only on really large investments of which there are not many on the market.
    Cautionary tale - I started putting money into moneything about last January. I invested in almost all available loans ( with exception of Luton, Bury, Manchester, Putney and Plymouth.) Now 8 months later I have 15 loans I am in , a couple of loans repaid and 2 loans defaulted which represent about 15% of my capital. So if it will be lost a net return will be about -10%. I do not see how I could have done anything different/ better. It does not mean I am selling off - just for information purposes.
    • bigadaj
    • By bigadaj 5th Sep 17, 11:03 PM
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    bigadaj
    The hourly rate of an adviser would be justified my be only on really large investments of which there are not many on the market.
    Cautionary tale - I started putting money into moneything about last January. I invested in almost all available loans ( with exception of Luton, Bury, Manchester, Putney and Plymouth.) Now 8 months later I have 15 loans I am in , a couple of loans repaid and 2 loans defaulted which represent about 15% of my capital. So if it will be lost a net return will be about -10%. I do not see how I could have done anything different/ better. It does not mean I am selling off - just for information purposes.
    Originally posted by justme111
    I'm fairly sure Moneything have generated more than 20 loans in the last eight months.

    They've only had the two defaults I believe so in some ways you are unlucky, as well as more loans spreading across more platforms is one potential solution.

    Given all their loans are secured then a total loss is somewhat unlikely, recovery may be full but I'd estimate at least 75% and less than 50% would be quite a shock.
    • justme111
    • By justme111 6th Sep 17, 8:35 AM
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    justme111
    I am sure there were even less as a few that came up were further tranches of loans from previous times and/or a few tranches of the same loan.
    Re unlucky - I am not sure about that. Unless one would have rejected those loans on DD grounds one was bound to be in them if one used the platform im the last year and with a low deal flow they were bound to represent a significant proportion of one's investment there - that is what I am getting at. Indeed if the recovery is decent it will still be worth it , probably far from the headline rate though, shall report. Yes I am using a few more platforms , what remains to be seen though is whether all of them are going to have similar default rate ; if they do then diversification is not going to help as having 1 loan defaulted in 10 or 10 in 100 is the same.
    • Pentirebob
    • By Pentirebob 7th Sep 17, 5:19 PM
    • 1 Posts
    • 0 Thanks
    Pentirebob
    Crowdfunding
    I'm new to all this forum thing, so not sure if I'm "in the right place". If I'm not, please advise where I'm best able to get the information I'm looking for.
    I'm looking to invest in a start-up that is raising funds via Crowdcube.
    Has anybody had any experience of this operation?
    Thanks and regards,
    Bob
    <><
    • Brunnen-G
    • By Brunnen-G 8th Sep 17, 7:57 PM
    • 16 Posts
    • 6 Thanks
    Brunnen-G
    Where are you seeing this? On the rate trends page the highest 5 year that I can see matched is 6.0% on 1st Sept.
    Originally posted by Ash Pole
    Sorry for not replying sooner, I've just noticed this post. I discovered it by pure chance by logging in that day to check my holding balance. I deposited a bit extra and manged to get quite a bit lent at 7.3%.
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