P2P lending - where's best?

redux

There are various investment trusts, several quite new in the last year or so, one or two with some support from certain other fund manager names, which deal in p2p and similar debt instruments.

It looks like dividends might eventually be of the order of 6 to 7%, but some aren't clear yet. One or two trusts are set up by people with a hedge fund background, and they do seem to higher management fees than average.

I'm not saying this is the way to go, but it might interest some who would like to spread a bit of money across this sector without doing a lot of research for each deal. On the other hand how much trading and repackaging is going on, and some of these have quite a proportion in USA where the trading of debt all blew up before. How much is just bandwagon-jumping and how much fairly astute?

masonic

redux wrote: »

I'm not saying this is the way to go, but it might interest some who would like to spread a bit of money across this sector without doing a lot of research for each deal. On the other hand how much trading and repackaging is going on, and some of these have quite a proportion in USA where the trading of debt all blew up before. How much is just bandwagon-jumping and how much fairly astute?

These might be attractive and of use to some people, but if your objective is to deversify away from equities into something uncorrelated, then from what I've seen of the price movements of these ITs, they aren't so good in that respect.

redux

masonic wrote: »

These might be attractive and of use to some people, but if your objective is to deversify away from equities into something uncorrelated, then from what I've seen of the price movements of these ITs, they aren't so good in that respect.

It's a bit hard to judge them yet, how they'll do in the medium or longer term.

I assume two things so far, that some might not yet be fully invested, and that some look like they moved to premiums just after launch, and have now moved back to sensible areas. Taking these together, it might still be too soon to tell, which is why I mentioned them but didn't recommend them. Maybe something for a bit of mild curiosity every few months.

w1ntermut3

Isn't there a massive moral hazard problem with P2P platforms?

They have no interest in anything other than matching loans to money, and so have no interest in making sure any DD is done on the financial viability of any loanee to not default OR the lender has the information to make a decision for themselves?

Sounds a bit 2007 to me!

masonic

w1ntermut3 wrote: »

Isn't there a massive moral hazard problem with P2P platforms?

They have no interest in anything other than matching loans to money, and so have no interest in making sure any DD is done on the financial viability of any loanee to not default OR the lender has the information to make a decision for themselves?

Sounds a bit 2007 to me!

Funnily enough, one or two of the regulars here have made exactly that point. But a platform that starts to rack up defaults is going to go out of business pretty fast as people pull their money. So I think they do have an interest in making sure they do some DD if they value their business.

There are various types of platforms with varying visibility over the people/businesses being loaned the money and security being held (where the loan is asset backed). On some platforms there is plenty of information available on each loan for prospective lenders to be able to make an informed decision as to whether to invest.

Thrugelmir

masonic wrote: »

Funnily enough, one or two of the regulars here have made exactly that point. But a platform that starts to rack up defaults is going to go out of business pretty fast as people pull their money.

Hence Lord Turners comments. Investors are like buffaloes. They follow the herd. A high level of defaults may be totally uncorrelated to the business model of the platform itself. Could simply be bad luck. After all lending money is risky. Always has been.

jamesd

Thrugelmir wrote: »

Hence Lord Turners comments.

Surely you've read the transcripts that thoroughly debunk those comments because the BBC edited his comments so badly that they grossly changed the meaning?

Lord Turner was discussing the specific practice of doing small business lending using only online checks, not full underwriting with things like business visits. The initial BBC version omitted all of that detail to just leave the P2P comment but not the particular bit of P2P he as referring to.

w1ntermut3

Either way, I can't see a reason not to throw £1000 the way of Ratesetter, as they're offering 14% over a year (including the 100 bonus).

Thrugelmir

jamesd wrote: »

Lord Turner was discussing the specific practice of doing small business lending using only online checks, not full underwriting with things like business visits.

Personally I wouldn't regard business visits as underwriting. SME lending is inherently risky. Directors prefer to use other peoples money rather than their own for good reason.

Daz2009

w1ntermut3 wrote: »

Either way, I can't see a reason not to throw £1000 the way of Ratesetter, as they're offering 14% over a year (including the 100