What % do you put into P2P ?

jaydeeuk1

I think I've been more adventurous/reckless than most with p2p (moneything).

My monthly investments/savings are approx

pension 50%
s&s isa 20%
p2p 20%
reg savers 10%

p2p is spread across some 8 different loans to help mitigate some risk, but I'm going in with eyes open. Should interest rates start to rise I'll probably divert elsewhere.

grey_gym_sock

i have 0% P2P.

i was wondering about some of platforms who have higher rates and secured lending (ones to investigate were: AC, AR, TC, MT, FS, SS). this would be as a substitute for some of my equities, not a substitute for cash.

seems like a lot of effort, though, to do it sensibly. unlike equities, where the laziest approach (e.g. vanguard lifestrategy) is actually a pretty decent option.

Jonbvn

N1AK wrote: »

My general issue with situations like this is that I find it highly unlikely that when people want money for low risk asset backed lending the best rate of return they could manage is high enough to give a 12% return.

If you wanted to borrow money and were a safe bet why would you borrow from someone lending at that rate when you could borrow from a less cautious p2p platform for less? The only scenario that makes any sense to me is that you don't borrow elsewhere because those p2p platforms wouldn't lend to you.

If you look Saving Stream, most of their lending is bridging finance secured on property. I would not categorize it as low risk, given that most mainstream lenders do not lend in this market. If you do some research on bridging loans, you will find a 12% return is relatively low. Of course SS charge borrowers more than 12% to cover their costs, profits etc.

There are a few P2P platforms in this market and their rates are quite similar.

Rollinghome

grey_gym_sock wrote: »

seems like a lot of effort, though, to do it sensibly. unlike equities, where the laziest approach (e.g. vanguard lifestrategy) is actually a pretty decent option.

The amount of effort involved to do it sensibly is the main turn-off for me. I find it takes a silly amount of my time.

Every platform has its own terms and risks that need to be read, understood and assessed; for some, every loan made however big or small has also to be understood and assessed. Long term, I don't need or want that much bother, especially for just 5-10% of my capital, and if I did I'd be hoping for better rewards elsewhere. Nor am I too comfortable with the conflict of interest where the lender wants the highest rates for the least risk but the platform wants to maximise fees from as much business as possible without direct risk to their own capital.

I get the impression that many see it as a hobby and would do it whatever the returns, which I guess is fine if you've time on hand and it floats your boat.

Malthusian

the two biggest risks to me seem to be

1. a property crash in the UK .... personally I dont see that happening anytime soon and dont think it would happen overnight anyway

It doesn't need a property crash to put Saving Stream and their investors into trouble. It just needs the particular properties on which they have a charge to be worth less than the valuers thought they were. It doesn't matter what the valuer thinks they're worth if SS can't find someone to buy them, and quick. And as I understand it SS loans are secured on commercial property, which is a massively different kettle of fish from residential. Check out the IPD index - 2007 in particular - and you'll see that commercial property can and does crash, and hard. And it bears repeating, an individual commercial property can be very difficult to shift, regardless of what the index is doing.

I have the same amount in P2P that I do in individual corporate loans - nothing. I won't invest in any asset class that hasn't undergone a massive failure. By which I mean: the fact that stock markets crash on a regular basis is well known, as is how to ride them out. With P2P by contrast there are still too many unanswered questions about the consequences of platform failure or significant defaults.

It doesn't help that you see too many people saying things like "I was sick of the low rates I was getting on my cash ISA so I invested with Wellesley". It's a non-sequitur because P2P is not a deposit.

jamesd

I anticipate having over 75% of my total investments in P2P by the end of the year.

So far as SavingStream goes, while they have only declared one default you should be aware of two relevant practices:

1. Interest is paid by the borrower at the start of the loan so there is much less possibility of payments troubles being noticed before the end.
2. Delayed exits are normal, with loans regularly being extended due to delays in sales or replacing the loan financing. this is provided for in the lending agreements so going beyond the planned term is not regarded as a default.

This doesn't mean that SavingStream is bad, far from it, but it does mean that you do need to not expect some measures of risk to be applicable for the platform.

saver861

jamesd wrote: »

I anticipate having over 75% of my total investments in P2P by the end of the year.

Good luck with that one ..... I don't think there would be many on here ... or anywhere else .... that would endorse that as a sensible strategy.

Personal choice, yes of course, ..... sensible? ....... not from where I'm looking!!

bowlhead99

saver861 wrote: »

jamesd wrote: »

I anticipate having over 75% of my total investments in P2P by the end of the year.

Good luck with that one ..... I don't think there would be many on here ... or anywhere else .... that would endorse that as a sensible strategy.

Personal choice, yes of course, ..... sensible? ....... not from where I'm looking!!

It is probably not a strategy that many would find sensible because playing in the credit markets and understanding the nuances of asset backed financing and having the time and competence to do research and deploy cash efficiently with a good risk/reward across all your highly diversified holdings as they get settled early or have their maturities deferred, is not something that fits well with the profile of a typical "retail investor". If was someone's granny doing it because 10% annualised on bridging finance sounded better than 1% in her cash ISA, you'd probably be right to warn her off.

Obviously, it's a big call to favour individual selected credit investments over cash and established debt and equity and property markets accessed through collectives. Having three times as much in p2p as in everything else put together requires some faith in your own abilities, given your returns will be so dependent on correctly judging what's on offer and its risk, to identify that you're happy with where every £100 is going (or whatever level of granularity you choose).

Still, if you do your analysis and determine that most domestic and international mainstream equity and debt opportunities are terrible value, it makes logical sense to use the niche options that you judge are not terrible.

The trick is to ensure that you're doing your investing in something that you genuinely consider to be a good option rather than merely the 'least worst' option. If it's not clear to you, keep your powder dry for future opportunities.

saver861

bowlhead99 wrote: »

Obviously, it's a big call to favour individual selected credit investments over cash and established debt and equity and property markets accessed through collectives. Having three times as much in p2p as in everything else put together requires some faith in your own abilities, given your returns will be so dependent on correctly judging what's on offer and its risk, to identify that you're happy with where every £100 is going (or whatever level of granularity you choose).

Clearly anyone can do significant research and assess the range of risk etc. However, regardless of how much research you do and determine to the n'th degree the validity of that risk, you are still dependant on many factors beyond your control.

bowlhead99 wrote: »

Still, if you do your analysis and determine that most domestic and international mainstream equity and debt opportunities are terrible value, it makes logical sense to use the niche options that you judge are not terrible.

Sure! - if you put two ugly women together, one might look less ugly than the other ... however, it does not make her pretty!!

bowlhead99 wrote: »

The trick is to ensure that you're doing your investing in something that you genuinely consider to be a good option rather than merely the 'least worst' option. If it's not clear to you, keep your powder dry for future opportunities.

But even if you determine it is a genuinely a good option, putting more than 75% of your investments into it does sound like its either going to end up very rosy or very tearful. It might be that the investments will make good returns and that the 75% can be pulled out prior to crash etc. so its not to say it can't work good. However, how many on here would do the same, be it your uninformed granny or your financially astute uncle!

Of course the actual monetary value of over 75% of investments will vary greatly for each individual - so the sums involved may not be significant depending. However, I recall jamesd saying on another thread that he plays the 0% credit cards and had an amount I think was over £50k on the cards which he was putting into p2p. I milk the 0% cards for all I can but I also ensure I have the money accessible ready to pay off the cards should I need to. Not sure if that £50k is part of the 75% or not but it sounded like a bit of extra risk to me.

bigadaj

It's interesting how different people's perception of risk is, and of course risk does vary in perception and actuality between most people.

The likes of Zopa and rate setter look unattractive not only because the rates offer little premium over what is available from guaranteed cash holdings but also because they are more opaque in their strategy than others. As others have pointed out the actual amount charged to borrowers will no doubt take up much of the difference between the higher rate paid by the borrower and received by the lender.

I've just started putting small sums into Savingstream and Moneything as well as £1k into rate setter just to get the £100 bonus. It does take time to get significant money into the market if you want to maintain diversification, and some of the loan to value ratios don't leave a lot of room for a fire sale if things go wrong and liquidation with fees are included for. There are also a lot of relatively low value projects which I found slightly surprising given the costs of raising capital that are no doubt involved. Valuations need to be taken with a pinch of salt as they aren't a guarantee of price or value, just as an estate agents estimate of your house will vary.

At the circa 12% earnings currently available then it certainly has its appeal, even with some allowance for default and recovery then this would be above the returns on equity investments, on an asset class that many might consider to be of lower risk.

Risk is such a gradational and personal issue and can only be assessed in hindsight, looking at vct performances on trustnet suggests that many if not the majority of vct funds are lower risk than mainstream equity for example.