Peer-to-peer lending sites: MSE guide discussion

fun4everyone

masonic wrote: »

In another twist to the Collateral story, several investors have reported getting an email outlining their positions according to the reconstructed platform data. These appear to have been sent only to a limited number of people (I haven't received one), and the inaccuracies are in part from the administrators treating loan parts that were listed for sale as being sold and not counted towards the total balance. There's some discussion here in the purple forum. Strangely nothing picked up in the blue forum.

I have not received an email either. I did receive the proof of debt form a while back and I agreed with the figures. Sounds like this is more incompetence from BDO. Were they not supposed to be computer whizz kids or something?

In other news, the secret to whiter Whites can be found here and here, perhaps maintaining some distance from Curries is part of the solution.

Haha, ****ing scammers the lot of them. Prize Competitions Limited :rotfl:. Another bridging loan company :mad:

masonic

fun4everyone wrote: »

I have not received an email either. I did receive the proof of debt form a while back and I agreed with the figures. Sounds like this is more incompetence from BDO. Were they not supposed to be computer whizz kids or something?

The working theory is that all of the people who received a statement had loans for sale and/or uninvested and their statement did not agree with the figures used for the proof of debt form (in some cases the difference is several thousand pounds). It's possible BDO has only so far sent out figures to those who have a discrepancy.

Haha, ****ing scammers the lot of them. Prize Competitions Limited :rotfl:. Another bridging loan company :mad:

I wish each of them every success in their new ventures, for entirely selfish reasons of course.

fun4everyone

masonic wrote: »

The working theory is that all of the people who received a statement had loans for sale and/or uninvested

Hmmm does not add up for me. I had uninvested cash on the site (a small amount but enough to have it noted) and I have not been emailed anything.

I wish each of them every success in their new ventures, for entirely selfish reasons of course.

sendu

I see that Funding Circle has been discussed quite a lot here, but WiseAlpha has not (I guess it's not quite P2P, but it hasn't been discussed anywhere else on the forum much either).
Is there a notable difference in risks between the 2? Both are authorised and regulated by the FCA, and neither is covered by the FSCS. Both are involved in lending to businesses.
With WiseAlpha "you are not participating directly in the senior secured loans or bonds issued by companies", and deal in notes. But at least the thing underlying is senior secured debt.
I'm not sure what exactly you get when you put money in to Funding Circle, but underlying it is unsecured debt.
So, secured vs unsecured, and notes vs ???. Any other risk metrics to consider them on?
How would you come up with your final relative risk assessment of them both?

masonic

I don't know the answer to your question, but the standard advice is if you don't understand the investment, don't invest.

For FC and other P2P, you are directly lending money to someone else and are a party to the loan agreement. It sounds like WiseAlpha is acting as a middleman, which is generally not a good thing.

short_butt_sweet

wisealpha seems to be doing something similar to a corporate bond fund, but with an unusual, untested ownership structure. i'd just buy a corporate bond fund instead.

FC (and other P2P that lends to businesses) is likely to be mostly lending to much smaller businesses. since you probably need to be borrowing at least tens of millions of pounds to justify the costs of issuing a real corporate bond. and lending to smaller businesses is generally riskier.

sendu

masonic wrote: »

I don't know the answer to your question, but the standard advice is if you don't understand the investment, don't invest.

Well, I'm hoping to gain an understanding by asking questions here

It sounds like WiseAlpha is acting as a middleman, which is generally not a good thing.

So on the one hand you have the risk of WiseAlpha going under and your notes being worthless, but if they stay up, your loans are more likely to recover more/all money during a default.

If FC goes under in theory your loan parts can be administered by someone else, but if a loan defaults then you may get less or no money out.

How do you assess which is actually the riskiest option? Just go with not putting all your eggs in 1 WiseAlpha basket?

sendu

short_butt_sweet wrote: »

wisealpha seems to be doing something similar to a corporate bond fund, but with an unusual, untested ownership structure. i'd just buy a corporate bond fund instead.

Are there ones offering >8% after fees? If not, why not? What is it about WiseAlpha's structure that enables them to pass on these higher rates? What is stopping WiseAlpha from offering the same sort of regulatory reassurances and "safety" you'd get in a normal corporate bond fund?

masonic

sendu wrote: »

Well, I'm hoping to gain an understanding by asking questions here

So on the one hand you have the risk of WiseAlpha going under and your notes being worthless, but if they stay up, your loans are more likely to recover more/all money during a default.

You are investing in unregulated bonds issued by WiseAlpha Technologies Limited. WiseAlpha is an investment company that uses the money it raises to invest in the bond markets. It needs to make enough money from its investment activities to cover your returns. If it doesn't then it goes under and administrators would step in to liquidate the company's assets. Which might return some, all or none of your capital.

It's a very similar situation to London Capital & Finance, but (hopefully) without the 25% commissions and questionable borrowers.

If FC goes under in theory your loan parts can be administered by someone else, but if a loan defaults then you may get less or no money out.

Yes, the key difference is that if FC goes into default, it has no direct and immediate impact on your investments.

How do you assess which is actually the riskiest option? Just go with not putting all your eggs in 1 WiseAlpha basket?

I think that's impossible to determine. Both have 100% loss potential, in the case of FC it depends greatly upon your investment choices, in the case of WiseAlpha it depends greatly upon their investment choices and inner workings of the company.

masonic

sendu wrote: »

Are there ones offering >8% after fees? If not, why not? What is it about WiseAlpha's structure that enables them to pass on these higher rates? What is stopping WiseAlpha from offering the same sort of regulatory reassurances and "safety" you'd get in a normal corporate bond fund?

No chance. Mainstream corporate bonds yield anything from <1% up to about 7% at the high end of the risk spectrum. Anything above that is junk. You might get a 5-6% yield from the highest yield bond funds, with capital fluctuations and a 1-2% management charge.