What % do you put into P2P ?

racing_blue

I'm a naysayer, not because I hate P2P but because of the principle on which my portfolio is organised: % risky, % safe.

Where would I put a basket of unsecured loans? I think it would have to be "at risk" and yet at the same time I'd be expecting it to behave like a defensive asset, preserve capital and provide a yield. So it feels like neither fish nor fowl.

Plus, interest rates are rock bottom, and any rise is going to take the sheen off the yield of existing P2P loans, as well as perhaps making future loans less affordable and more risky.

Plus, if I want exposure to lending, I can buy shares in a bank and have professionals do the grunt work for me.

So it's not for me & never will be

saver861

0% from me and I don't see that changing anytime soon!

Some quote the paltry returns from other avenues as a justification for going to p2p for significantly better returns. There are ways of getting reasonable returns above current inflation rates for a lot less risk.

I have some long term investments in aggressive funds etc so have already some exposure to risk. They have done ok and have the track record.

P2P is that new kid on the block that no doubt has some mistakes to learn by as it moves along. I'm not sure I would want my money to be paying for some of that learning process.

An old boy I knew a long time ago was a regular punter horse racing punter. He told me once to 'never bet on apprentice jockeys cos you just never know what they are going to do'. P2P kinda feels a bit like the apprentice jocks at this stage!!

nushnush

less than 2% just now but i am about to increase it, i have opened an IF ISA with Abundance. it will only make 2% until debentures are permitted in the isa, then i can invest, as its a flex isa i can also withdraw cash and use the money for other investments so long as i put it back in this financial year.

MadMat

I have £25 monthly (10% of my monthly long term savings) going into the ratesetter 5 year market to test the water. Considering starting another £25 a month into a second platform later this year.

bowlhead99

IMHO, such "testing the water" has very limited usefulness as a practical test, because the loans now don't tell you anything at all about the creditworthiness of whoever you'll be lending new money to in several years time or the long term stability of the platform.

If you want to know what proportion of investors default, you can get anecdotes from a few people here which would be statistically more useful than your own sample size of £50pm. If there's a major problem with a platform you will hear about it here or on the p2p forums and don't need to experience it first hand; while if there isn't a major problem then it won't tell you that there won't be one a couple of years later when you have more money there.

So perhaps I'm being pedantic, but such "dipping a toe in" is not really necessary. As Yoda would say- 'Do, or do not, there is no Try'.

masonic

racing_blue wrote: »

I'm a naysayer, not because I hate P2P but because of the principle on which my portfolio is organised: % risky, % safe.

Where would I put a basket of unsecured loans? I think it would have to be "at risk" and yet at the same time I'd be expecting it to behave like a defensive asset, preserve capital and provide a yield. So it feels like neither fish nor fowl.

I agree about the unsecured loans, especially those to consumers. It seems far too easy for them to walk away and I get the impression people simply don't fear the consequences of bad credit enough to be deterred.

I've been sticking to secured loans and choosing them quite carefully. You may still consider these to be too risky for you to categorise as 'defensive' too. They are borderline for me, but then I consider commercial property funds to be 'growth' rather than 'defensive', which is an opinion others may not share. In some sense, I'm investing in P2P in lieu of equities because I want to diversify my growth holdings in a global market where everything seems highly correlated.

Plus, interest rates are rock bottom, and any rise is going to take the sheen off the yield of existing P2P loans, as well as perhaps making future loans less affordable and more risky.

I'm not sure I follow here. Many loans have a commitment of 6-12 months, assuming you can't sell earlier on the secondary market, and if interest rates rose by 1% in the next 12 months (which is highly unlikely IMHO), then I doubt that would have much impact on savings rates at all. Over the long term, if interest rates and inflation rose significantly, but P2P rates did not, then certainly 6.5% with the certainty of a savings account vs. 12% from P2P might make one think twice, given bad debt is likely to reduce that 12% to some extent. I exhausted all of the current 6% and 5% savings options before considering P2P myself. Of course, if something like that played out, I'd simply stop investing in new loans and rotate my money out of P2P over several months.

In fact, the more likely scenario is that as these loans become more popular, supply and demand will drive rates down, so new loans may start to look unattractive, in which case, I'd do as above and stop reinvesting in those new loans.

Plus, if I want exposure to lending, I can buy shares in a bank and have professionals do the grunt work for me.

Wouldn't a debt fund be a better way to get exposure to lending? Bank shares would hardly fit into your defensive basket.

Biggles

I didn't have a fixed limit but, just out of curiosity, I did the sums. As we speak, it's looking like:-

S&S 44%
Buy to let 46%
P2P 5%
Other bank a/cs 5%

I've been in P2P for just a year now and have been consistently getting 12% across five platforms (AR, AC, FS, MT & SS) without any defaults or alarms*. P2P is the only type I am presently adding to when spare funds turn up.

* There was one minor default but the assets were sold and lenders paid out.

N1AK

TheTracker wrote: »

Be careful not to equate lending rates with borrowing rates. Some of the platforms which strive to look cautious swallow up the gap between lending and buying rates with advertising, provision fund contributions, and free iPads. The other reason is the type of loan, some platforms want Joe blogs to refinance his £5k credit card debt, others lend 7 figure business development loans.

I don't believe that I did, and I think it'd be naive to think there isn't a correlation between the two. There are a number of establish p2p platforms lending to different markets with different structures, if a new platform is offering considerably better returns then the idea that they've found a way to be incredibly careful about who they lend to while considerably beating the returns less cautious lenders offer is sufficiently unlikely that it requires considerable evidence to make it credible.

paddyrg

I've got a couple of grand in Ratesetter, after talking with Rhydian (the guy behind it) when they were just launching I thought it worth a punt, bit of diversification.

I said at the time that if I were setting up a giant Ponzi scheme, that this was exactly what it would look like. I don't think it's the case with ratesetter (I did some due diligence), but I'm certain some lesser P2P vehicles will be hooky, probably the ones offering the best rates TBH!

mvarrier

I have >50% of my liquid assets in P2P. I have been earning 12% over the past year with no losses.
I am diversified across many loans and I tend to sell out of the loans before term and recycle the money in 'fresher' loans. On saving stream the interest for the duration is paid in advance (to SS) so the chance of an early fault is reduced.

I am not naive to the risks involved or that overall expected returns over an economic cycle are likely to be significantly less than 12%.

I too believe that the main risk is platform risk or a major downturn in the value of the assets used as security (I don't do any unsecured lending).