Why P2P Lending Should Be A Sizeable Part Of Your Retirement Planning

Aceace

Malthusian said:

I'm not suggesting for 1 minute that someone should put all of their investable funds in P2P, only 50% of my own are there.

The vast majority of investors cannot afford the potential for total and permanent loss of 50% of their retirement fund. Most can't afford 5%.

I hope they don't invest in equities then because there is a risk of total loss there too. Companies go bust. Its just a case of whether you believe the likely return from any particular investment is worth the risk. I judge that a likely return of 7-8% from CP is good value. You clearly think it is poor value. 

Malthusian said:

I imagine CP take a different view to you. They are trying to build a long term profitable and stable business. Screwing either lenders or borrowers when you have the opportunity would probably be counterproductive.

Yet that is exactly what they are doing by setting the interest rate many times higher than it needs to be for the borrower to get 100% of funds required.

Either the borrowers are mugs for accepting loans at a much higher interest rate than they need to pay. Or the lenders are mugs, and 98% of them are piling into the loans because "it's more than my bank account pays".

I don't agree. Yes the loans are oversubscribed by lenders by a very large amount, but borrower applications for funding is also oversubscribed by a very large amount. Both parties are getting a good deal. Lenders are getting a good return for the risk they are taking. Borrowers are clearly eager to borrow at the rates asked due to the exceptionally fast turnaround that CP can achieve, and the helpful and collaborative service that CP bring to the table. CP have become a lender of first resort. 

Malthusian said:

I don't feel qualified to comment on why a company does or does not choose to publish its P&L, suffice to say its very common in startups. I agree it's a red flag. 

Most small startups do not solicit investment from the general public.

There is no legitimate reason for a company which does to withhold basic financial information from potential investors.

Again, I agree is a red flag, but I don't see how you are in a position to judge that there is no legitimate reason. 

Malthusian said:

I don't really understand your point on rates. A 7-8% return for this type of proposition seems fair to me. I imagine that the anticipated 1% loss is driven by some requirement to state one and this being the lowest figure available (pure speculation). In reality is been exactly 0% since their inception 7 years ago.

All pseudo-regulated loans have an inherent possibility of 100% loss (as Lendy et al demonstrate). If an investment is promising returns of 7-8%pa while claiming loss potential is 1% it is a scam.

How long the P2P platform has been going tells you absolutely nothing. An investment which paid 8%pa and made no profit whatsoever would take ten years to collapse, assuming it took in new money at a constant rate. Buy2letcars ran for 8 years.

Yes there is risk. Its an investment. They are not claiming that the loss potential is 1%. They are stating an anticipated loss of 1%. They are advising lenders that some losses on some loans will happen eventually, and that in their view it would be reasonable to assume that one's profits are reduced by this amount. So far there have been no losses in any of their loans. Given the number of things that can go wrong with development loans, especially through Covid, that's a massive achievement.  I personally judge the chance of a loss in a diversified CP portfolio to be low, and that a likely 7-8% return is adequate compensation for that risk. 4thWay gives them their top rating; meaning "average lender expected to make money through a severe recession and major property crash. Exceptional calculated risk-reward balance." 4thWay give them a risk score of 4/10; meaning "an expected loss before interest earned of up to 5% in a very severe recession or property crash".

I don't agree that the length a P2P platform had been going tells you nothing. Surely if a platform had returned consistent returns for a hundred years it would tell you something! While your last 2 sentences are obviously correct they simply don't apply to CP. CP is not Lendy and it's not Buy2letcars and they don't deserve the comparison. 

Aceace

Thrugelmir said:

Aceace said:

Your right, this furrow is a lonely place ☹

3 and half years isn't long enough to ascertain the results of your ploughing. When you've experienced a full economic cycle or a severe downturn. Then you'll have a better idea as to whether what you've sowed will reap a substantial return.  The fog of the global pandemic has yet to lift. The greatest challenge that investors have faced in a very long time. 

It's a fair point.  Though most of the platforms I invest with have been going for considerably longer than that, but still not a full economic cycle. 

And thank you for not adding "therefore it's a cr*p investment and you will definitely lose all your cash" 🙃

Thrugelmir

Aceace said:

Thrugelmir said:

Aceace said:

Your right, this furrow is a lonely place ☹

3 and half years isn't long enough to ascertain the results of your ploughing. When you've experienced a full economic cycle or a severe downturn. Then you'll have a better idea as to whether what you've sowed will reap a substantial return.  The fog of the global pandemic has yet to lift. The greatest challenge that investors have faced in a very long time. 

And thank you for not adding "therefore it's a cr*p investment and you will definitely lose all your cash" 🙃

You might, you might not.  The key to any investment is do plenty of research and due diligence. Spend enough time and as a small retail investor you may well be able to carve yourself a profitable niche. The one certainty is that's rarely any free lunches. 

bostonerimus

The evangelism and rapid rebuttal of criticism is telling. The true believer not only needs to believe they also need to make others believe too. Personally I would never invest in P2P, crowd funding of small companies or stuff like mini-bonds that are only available on proprietary platforms. The chance of 8% return is not tempting given the possibility of 100% loss.

bostonerimus

Thrugelmir said:

Aceace said:

Thrugelmir said:

Aceace said:

Your right, this furrow is a lonely place ☹

3 and half years isn't long enough to ascertain the results of your ploughing. When you've experienced a full economic cycle or a severe downturn. Then you'll have a better idea as to whether what you've sowed will reap a substantial return.  The fog of the global pandemic has yet to lift. The greatest challenge that investors have faced in a very long time. 

And thank you for not adding "therefore it's a cr*p investment and you will definitely lose all your cash" 🙃

You might, you might not.  The key to any investment is do plenty of research and due diligence. Spend enough time and as a small retail investor you may well be able to carve yourself a profitable niche. The one certainty is that's rarely any free lunches. 

My lunch wasn't free, but it was cheap and I didn't have to work at it either. No niches, no P2P, just index trackers for 30 years. I don't have the time or interest to do due diligence on companies, fund managers, P2P loans or platforms and I would not like to keep track of 35 of them.

Malthusian

Aceace said:

I hope they don't invest in equities then because there is a risk of total loss there too.

Equities can be diversified such that the potential for permanent losses is zero (limited to apocalypse scenarios involving total collapse of the world economy). The same is not true of P2P, given that, as discussed in this thread, there are people who diversified over several supposedly respectable platforms and still made permanent losses. (A level of effort not necessary in mainstream equities to reduce non-systemic risk, as you can just bung all your money into a multi-asset tracker.)

I don't agree. Yes the loans are oversubscribed by lenders by a very large amount, but borrower applications for funding is also oversubscribed by a very large amount. Both parties are getting a good deal.

If I go to a middleman asking to borrow money, and he offers me a loan at 8% that is 50x subscribed, I am being screwed. He could have offered it at say 6% and probably still obtained 100% of the funding. What anyone else does changes nothing. How many other borrowers queue up to be screwed also changes nothing.

If both borrowers and lenders are queuing up round the block then one side is being screwed. Either a bunch of hapless property developers are queuing up to borrow money at way over the odds while investors rush to coin it in off their backs, or a bunch of hapless investors are queuing up to lend money in ultra-high-risk pseudo-regulated loans without fully appreciating the risk, while obscure property entrepreneurs rush to secure easy money.

The fact that there are far more hapless investors than hapless commercial property developers in the world suggests it is the latter.

The fact that punters are claiming that they have a marvellous investment that pays 7-8%pa with only 1-5% loss potential and people should shovel half their pensions into it also suggests it is the latter.

Again, I agree is a red flag, but I don't see how you are in a position to judge that there is no legitimate reason.

Feel free to list any legitimate reasons for a company soliciting investment from the public to withhold basic financial information from the public. If you can't list any, that's the position.

Yes there is risk. Its an investment. They are not claiming that the loss potential is 1%. They are stating an anticipated loss of 1%. They are advising lenders that some losses on some loans will happen eventually, and that in their view it would be reasonable to assume that one's profits are reduced by this amount. So far there have been no losses in any of their loans. Given the number of things that can go wrong with development loans, especially through Covid, that's a massive achievement. 

It's also irrelevant. All individual loans have an inherent risk of 100% loss. All investment schemes pay out until they don't.

I personally judge the chance of a loss in a diversified CP portfolio to be low, and that a likely 7-8% return is adequate compensation for that risk. 4thWay gives them their top rating; meaning "average lender expected to make money through a severe recession and major property crash. Exceptional calculated risk-reward balance." 4thWay give them a risk score of 4/10; meaning "an expected loss before interest earned of up to 5% in a very severe recession or property crash".

In the real world 5% loss potential = something like short to medium term gilts with a yield of not much more than zero.

Any individual commercial loan has an inherent possibility of up to 100% permanent loss. Claiming that the loss potential of any P2P investment is 5% is misleading in the extreme.

agent69

Aceace said:

agent69 said:

Aceace said:

agent69 said:

Aceace said:

agent69 said:

Aceace said:

Malthusian said:

Albermarle said:

agent69 said:

Aceace said:

Daz2009 said:

I take it the OP wasn't invested in Moneything,Collateral,Lendy or Funding Secure to name but 4 who've lost me thousands of pounds.
Only Ratesetter and Zopa could be considered a success for me and even then the returns were under 5%.
I wouldn't touch P2P with a barge pole

I'm sorry for your losses. You seem to have been very unlucky in your choice of platforms. 

 

Not really, they were 4 of the most prominent platforms around. I would be suprised if anyone with significant exposure to p2p wouldn't have invested significant amounts.

When I first started with P2P , all the four platforms mentioned , were clearly at the riskier end of the spectrum . 12% + interest rates was an obvious red flag ,

bostonerimus said:

If you are happy with P2P then great. Obviously many people do not share your enthusiasm. So maybe just enjoy your investment, you don't have to be an evangelist about.

Unless your returns depend on new money entering the platform so existing investors can continue to cash out at par values. Then being an evangelist becomes highly advisable.

The platforms I mentioned either don't have secondary markets or don't allow them to be used for loans in distress. There would be nothing to be gained from "evangelising", quite the opposite. Getting ones funds deployed on the decent platforms has become rather difficult. Taking CrowdProperty as an example (it has no SM): the platform has become so well regarded that their loans are often as much as 50 times oversubscribed, leaving lenders with only 2% of the amount they wanted to lend. Extra lenders on there right now is the last thing I need! 

Actually, I'm a minor shareholder in CrowdProperty and several others, so I suppose it's possible that I could have had an ulterior motive. I don't, but that's impossible for me to prove. 

But the same was true a few years ago for platforms that have subsequently gone bust. I can remember when Lendy had INPL and loans were dissapearing off the shelf as quickly as they were offered.

You know what they say: past performance should not be used as a guide to future returns.

😄 I'm in total agreement with that statement. But you've used the past performance of a now extinct scam platform as a reason to disregard a current professional, competent, respected and profitable platform that has an unblemished record over the past 7 years. 

I would be interested to know how you have ascertained this.

A recent article in 4thway stated - Up to March 2019, the date of CrowdProperty‘s last filed accounts, it appears to be making six-figure annual losses, but there's some guesswork here, because the accounts are unaudited and contain little information.

Aslo, having had a quick look at the independent forum, I wonder if the handling of the loan to redevelop the former Lloyds Bank site at T**bridge has been handled in a competent fashion. It appears that 3 years after money was lent, no work has been undertaken and the borrower has used the cash for other projects.

CrowdProperty have stated in the publicly accessible section of their current Seedrs round that they are now profitable. Further info is only available when logged in and cleared to access the pitch deck, so I can't repeat it on this public platform. 

You have chosen to pick on one of only 2 loans (out of the 338 loans that they have written) that are currently in default to besmirch them. That's hardly a balanced view. I can't comment on that loan in particular as I'm not personally in it, so don't have access to the actual details, and wouldn't be able to comment publicly anyway while they are in the process of recovering the loan. I have been in 3 of the other 6 loans that have defaulted. All capital and interest was recovered in all cases. 

P2P is not without risk. That's why lenders receive a return that is commensurate with that risk.  With the best will in the world, some loans will default. A professional company like crowdproperty will minimise the number of loans that default through their due diligence and maximise the recovery from those that do. CrowdProperty's website openly declares that they anticipate losses of 1% of capital, but that this is more than compensated for by the 7% to 8% pre-loss returns. So far, over 7 years of operation, and having completed roughly half those 338 loans,  they haven't lost a single penny in capital or interest in any of them. 

Comparing CrowdProperty to the likes of Lendy, Funding Secure, Collateral etc is completely misleading IMO.

Aceace said:

agent69 said:

Aceace said:

agent69 said:

Aceace said:

Malthusian said:

Albermarle said:

agent69 said:

Aceace said:

Daz2009 said:

I take it the OP wasn't invested in Moneything,Collateral,Lendy or Funding Secure to name but 4 who've lost me thousands of pounds.
Only Ratesetter and Zopa could be considered a success for me and even then the returns were under 5%.
I wouldn't touch P2P with a barge pole

I'm sorry for your losses. You seem to have been very unlucky in your choice of platforms. 

 

Not really, they were 4 of the most prominent platforms around. I would be suprised if anyone with significant exposure to p2p wouldn't have invested significant amounts.

When I first started with P2P , all the four platforms mentioned , were clearly at the riskier end of the spectrum . 12% + interest rates was an obvious red flag ,

bostonerimus said:

If you are happy with P2P then great. Obviously many people do not share your enthusiasm. So maybe just enjoy your investment, you don't have to be an evangelist about.

Unless your returns depend on new money entering the platform so existing investors can continue to cash out at par values. Then being an evangelist becomes highly advisable.

The platforms I mentioned either don't have secondary markets or don't allow them to be used for loans in distress. There would be nothing to be gained from "evangelising", quite the opposite. Getting ones funds deployed on the decent platforms has become rather difficult. Taking CrowdProperty as an example (it has no SM): the platform has become so well regarded that their loans are often as much as 50 times oversubscribed, leaving lenders with only 2% of the amount they wanted to lend. Extra lenders on there right now is the last thing I need! 

Actually, I'm a minor shareholder in CrowdProperty and several others, so I suppose it's possible that I could have had an ulterior motive. I don't, but that's impossible for me to prove. 

But the same was true a few years ago for platforms that have subsequently gone bust. I can remember when Lendy had INPL and loans were dissapearing off the shelf as quickly as they were offered.

You know what they say: past performance should not be used as a guide to future returns.

😄 I'm in total agreement with that statement. But you've used the past performance of a now extinct scam platform as a reason to disregard a current professional, competent, respected and profitable platform that has an unblemished record over the past 7 years. 

I would be interested to know how you have ascertained this.

A recent article in 4thway stated - Up to March 2019, the date of CrowdProperty‘s last filed accounts, it appears to be making six-figure annual losses, but there's some guesswork here, because the accounts are unaudited and contain little information.

Aslo, having had a quick look at the independent forum, I wonder if the handling of the loan to redevelop the former Lloyds Bank site at T**bridge has been handled in a competent fashion. It appears that 3 years after money was lent, no work has been undertaken and the borrower has used the cash for other projects.

CrowdProperty have stated in the publicly accessible section of their current Seedrs round that they are now profitable. Further info is only available when logged in and cleared to access the pitch deck, so I can't repeat it on this public platform. 

You have chosen to pick on one of only 2 loans (out of the 338 loans that they have written) that are currently in default to besmirch them. That's hardly a balanced view. I can't comment on that loan in particular as I'm not personally in it, so don't have access to the actual details, and wouldn't be able to comment publicly anyway while they are in the process of recovering the loan. I have been in 3 of the other 6 loans that have defaulted. All capital and interest was recovered in all cases. 

When it comes to profitability, I'll take a set of audited accounts over vague marketing waffle being used on Seedrs to raise money any time.

Agreed

CrowdProperty have stated in the publicly accessible section of their current Seedrs round that they are now profitable. Further info is only available when logged in and cleared to access the pitch deck, so I can't repeat it on this public platform. 

You have chosen to pick on one of only 2 loans (out of the 338 loans that they have written) that are currently in default to besmirch them. That's hardly a balanced view. I can't comment on that loan in particular as I'm not personally in it, so don't have access to the actual details, and wouldn't be able to comment publicly anyway while they are in the process of recovering the loan. I have been in 3 of the other 6 loans that have defaulted. All capital and interest was recovered in all cases. 

The point I have been trying to get across is that virtually all of your positive comments about todays P2P platforms could have been said in the past about now collapsed platforms. Default rates are a clasic example. Andrew Holgate at AC spent years telling investors that nobody had lost money, and Lendy were telling people nobody had lost money until virtually the day before they went pop. The reason thay can do this is that they are very reluctant to formally default loans, and if it's not defaulted then they can say you haven't lost any money yet. The number of loans formally defaulted on a platform is not a reflection of the health of its loan book.

Yes, I did understand your point that the scam platforms used to look good at first. I'm not sure any of them got to 7 years and still looked good though. I'm also aware that not defaulting bad loans was a tactic they used to hide problems and rack up lucrative fees for themselves (The FCA should have done sooo much better). 

Again taking CP as an example: they declare all loans that are more than 180 days late. So far that amounts to just 8 loans out of 339. They have had their loanbook verified by BRISMO (although that seems to have been some time ago) and have opened themselves up to scrutiny from 4thWay. If it was about to the way of Lendy I think the signs would be there by now. 

Wasn't it you who argued that the top 3 results of Indy polls should be disregarded because they're always wrong 😄

Your right, this furrow is a lonely place ☹

But they don't default them do they? Instead they either extend the end date, or roll the loan over. To quote somebody from the indy platform who invests with CP they - play fast and loose with the end dates and the term lengths.

I did suggest that people shouldn't take too much notice of recomendations made by laymen on internet forums (which is the point I have been making here), and I do note that in the latest indy survey CP are in second place.

Thrugelmir

bostonerimus said:

Thrugelmir said:

Aceace said:

Thrugelmir said:

Aceace said:

Your right, this furrow is a lonely place ☹

3 and half years isn't long enough to ascertain the results of your ploughing. When you've experienced a full economic cycle or a severe downturn. Then you'll have a better idea as to whether what you've sowed will reap a substantial return.  The fog of the global pandemic has yet to lift. The greatest challenge that investors have faced in a very long time. 

And thank you for not adding "therefore it's a cr*p investment and you will definitely lose all your cash" 🙃

You might, you might not.  The key to any investment is do plenty of research and due diligence. Spend enough time and as a small retail investor you may well be able to carve yourself a profitable niche. The one certainty is that's rarely any free lunches. 

My lunch wasn't free, but it was cheap and I didn't have to work at it either. No niches, no P2P, just index trackers for 30 years. I don't have the time or interest to do due diligence on companies, fund managers, P2P loans or platforms and I would not like to keep track of 35 of them.

When you are sitting at the top of the mountain it's easy to be smug and believe that it was ones own abilities that got you there. Rather than simply good fortune. Without events such as the benefit of a 40 year bond bull market. The next 30 years may well be a very different era. Much has changed in our lifetimes. 

Rollinghome

Aceace said:

 I personally judge the chance of a loss in a diversified CP portfolio to be low, and that a likely 7-8% return is adequate compensation for that risk. 4thWay gives them their top rating; meaning "average lender expected to make money through a severe recession and major property crash. Exceptional calculated risk-reward balance." 4thWay give them a risk score of 4/10; meaning "an expected loss before interest earned of up to 5% in a very severe recession or property crash".

Your faith in what appears to be an anonymous website worries me.  Who writes their stuff, and why do you give it any more credence than anonymous comments on a web forum or social media?

Their "Testimonials" page borders on comedy,  a testimonial being a formal statement testifying to someone's character and qualifications. Such as (as posted with their quotes):

“heres a good site that compares p2p.” Moneysavingexpert Review
“Good for a breakdown on how each platform operates and their perceived risk.” Moneysavingexpert Review
and impressive commendations such as:
“I like your site”  Jim Walls, 4thWay® subscriber

No author is named for the “Moneysavingexpert Review(s)”.  So are we expected to believe that those "testimonials" are by Martin Lewis or MSE staff? Or have they just been lifted from posts on this forum?  Have you asked?

There are real baked-in problems with P2P, not least, conflicts of interest from all directions.  There can be decent returns, but more than most investments, it becomes very risky without serious and time-consuming due diligence.  Relying on opinions from iffy websites isn't DD.

As mentioned earlier, I had quite a lot of money in P2P some years ago with a decent return but never more than 5-8% of investments, and in retrospect, given the risks, barely worth the amount of my time taken in comparison to the alternatives.  We don't know your circumstances or how much 50% of your investments might be, but on the face of it, it seems highly reckless and most people who still use P2P are likely to agree.

bostonerimus

Thrugelmir said:

bostonerimus said:

Thrugelmir said:

Aceace said:

Thrugelmir said:

Aceace said:

Your right, this furrow is a lonely place ☹

3 and half years isn't long enough to ascertain the results of your ploughing. When you've experienced a full economic cycle or a severe downturn. Then you'll have a better idea as to whether what you've sowed will reap a substantial return.  The fog of the global pandemic has yet to lift. The greatest challenge that investors have faced in a very long time. 

And thank you for not adding "therefore it's a cr*p investment and you will definitely lose all your cash" 🙃

You might, you might not.  The key to any investment is do plenty of research and due diligence. Spend enough time and as a small retail investor you may well be able to carve yourself a profitable niche. The one certainty is that's rarely any free lunches. 

My lunch wasn't free, but it was cheap and I didn't have to work at it either. No niches, no P2P, just index trackers for 30 years. I don't have the time or interest to do due diligence on companies, fund managers, P2P loans or platforms and I would not like to keep track of 35 of them.

When you are sitting at the top of the mountain it's easy to be smug and believe that it was ones own abilities that got you there. Rather than simply good fortune. Without events such as the benefit of a 40 year bond bull market. The next 30 years may well be a very different era. Much has changed in our lifetimes. 

That's true, everything is easy in hindsight. I did have the benefit of booming bonds, but also some pretty scary equity crashes. However, I think the critical thing was that I was always able to buy or sell on open, well regulated, markets and nothing ever defaulted.