11% over 3 years from Ablrate P2P

jamesd

Interest has now been paid to the accounts of those who mad bids on this loan before it completed. The platform is now out of service for their major upgrade. £256,000 was offered by 146 lenders in P2P before the loan was sent to the institutional investors for completion. Very impressive amount for a single loan on a relatively young platform.

TheTracker

agent69 wrote: »

I assume you were in loan 1? Loans 2 and 3 still going strong, and probably going to repay long before anyone has to worry whether Oddy will ever get a plane in the skies.

Ody recently extended loan periods.

jamesd

jamesd wrote: »

£256,000 was offered by 146 lenders in P2P before the loan was sent to the institutional investors for completion. Very impressive amount for a single loan on a relatively young platform.

Things have moved on a bit from then. Ablrate recently funded a £1.8 million short term aircraft loan at 13% taking less than a month to raise the money. Also has now wait listed a fully funded £600k 15.4% deal over five years that pays out only at the end. the only currently live new offer is 10% for a three year loan to a previous customer who repaid their earlier loan. Still about £40k to fill during the next seven days.

MoneyThing has been doing their usual range of interesting offers, adding loans secured on leased cars and some property development to their previous pawn offerings.

SavingStream has had a bit of a slowdown over the new year but seems now to have more normal deal flow at their usual 12%.

sparsely

This seems very unattractive to me. The loan is completely undiversified with significant amounts of counter-party risk, and presumably high (hidden) costs of lending via small, new organisations. I don't why you wouldn't just use a (possibly leveraged) junk bond fund instead to fulfil your very risky loan quota. Why are you expecting to be compensated for undiversified returns?

jamesd

This has rather better security against loss than a typical junk bond fund, though the potential for loss must always be considered. Still, what junk bond fund were you thinking of that pays at 13% or 15.4% with decent assets as security? That'd be another useful thing to consider as part of a mixture.

The degree of lack of diversification would depend on how much you put into this loan vs all other loans at that an the other platforms. I expect people to have sensible diversification policies that are commensurate with their risk tolerance and capacity for loss.

With typically 10-20 loans per week combined from the three places I've mentioned there's ample deal flow for sensible diversification between borrowers, assuming a modicum of patience and fairly typical amounts to invest.

As always with investing the rule is if you don't like it or don't understand it, don't get involved. There's always another possibility around.

sparsely

I'm skeptical about the level of security that an aeroplane offers - it seems that could be large costs associated with repossession. There also appear to be all sorts of hard to evaluate legal and counterparty risks which are very difficult for an outsider to evaluate. Those 13% is conditional on both the company not going bust and on the company not becoming creditworthy enough that it can repay the bond early.

I can't post links so you'll have to google it but 11% isn't an unusual return for a global covered bond index. Something like ICOV is available on most platforms and gets you loads of diversification with a low TER.

As you say if you don't understand it don't get involved - I certainly won't be and I suspect that many of the investors in these loans shouldn't be either.

jamesd

sparsely wrote: »

I'm skeptical about the level of security that an aeroplane offers - it seems that could be large costs associated with repossession. There also appear to be all sorts of hard to evaluate legal and counterparty risks which are very difficult for an outsider to evaluate. Those 13% is conditional on both the company not going bust and on the company not becoming creditworthy enough that it can repay the bond early.

1. There would be costs associated with repossession. The loan to value is about 57% based on independent value, ample to cover such costs. The current owner is a European listed company that wants to get the aircraft off its books as soon as it can. The loan is to facilitate a long established aircraft leasing firm in this size of aircraft buying it off them sooner.
2. There are currently three buyers seeking to purchase the aircraft off the leasing firm.
3. The loan terms prohibit early repayment. The term of this loan is three months.
4. There are well established international agreements around seizing aircraft and manufacturers and legitimate channels will refuse to supply spare parts for an aircraft that is subject to such claims.
5. The former principal of the leasing firm was also a major equity holder in Ablrate. I'm unsure of the current situation after his recent death but a son of his is now running the leasing firm and may well have that Ablrate interest as well now.

There certainly are a wide range of issues to consider and research before doing lending on such a loan and someone who doesn't want to do that shouldn't invest in it.

bowlhead99

sparsely wrote: »

I can't post links so you'll have to google it but 11% isn't an unusual return for a global covered bond index. Something like ICOV is available on most platforms and gets you loads of diversification with a low TER.

I did just Google it (iShares Euro Covered Bond index). January factsheet says annualised return since inception in 2008 is 5.4% against 5.5% benchmark.

In *one* year (2012) in the last five it actually got 11%, while for calendar 2015 it got 0.28%.

Yes, loads of diversification. Not at all the same level of return. Or what am I missing?

https://www.blackrock.com/uk/individual/site-entry?targetUrl=%2Fuk%2Findividual%2Fliterature%2Ffact-sheet%2Ficov-ishares-euro-covered-bond-ucits-etf-fund-fact-sheet-en-gb.pdf%3FsiteEntryPassthrough%3Dtrue

(Link might be a bit funny as posting on mobile).

jamesd

sparsely wrote: »

I can't post links so you'll have to google it but 11% isn't an unusual return for a global covered bond index. Something like ICOV is available on most platforms and gets you loads of diversification with a low TER.

Would that be the ICOV with ISIN IE00B3B8Q275 iShares Euro Covered Bond UCITS ETF which has a 1.17% distribution yield?

If so, there's a fair difference between 1.17% and 11% or 13% yield.

Selling with a capital gain is possible on the Ablrate secondary market. Likely, even, for a loan of this yield in my experience. I wouldn't be surprised to see gains larger than the total return of ICOV for the whole of the last five years.

sparsely

It has had annual total returns of
3.62 11.06 3.24 7.43 0.28over the last 5 years - pretty comparable to this I'd say considering the massively reduced risk.