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  • FIRST POST
    • funkey_monkey
    • By funkey_monkey 13th Sep 18, 1:11 PM
    • 352Posts
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    funkey_monkey
    Octopus Choice
    • #1
    • 13th Sep 18, 1:11 PM
    Octopus Choice 13th Sep 18 at 1:11 PM
    Does anyone on here know much about Octopus Choice?

    I've seen one thread about Octopus Investments, but that was specifically about a particular posters circumstances as opposed the investment itself.

    I've been recommended it as an alternative home for my 40k cash savings which are currently in a bank savings account at a very low interest rate.

    It was recommended by the IFA. I'm concerned about it because it seems to be concentrated solely in the property market.

    Is this a better P2P option that the usual options - Funding Circle, Zopa etc?


    Thanks.
Page 1
    • Linton
    • By Linton 13th Sep 18, 2:01 PM
    • 9,703 Posts
    • 9,941 Thanks
    Linton
    • #2
    • 13th Sep 18, 2:01 PM
    • #2
    • 13th Sep 18, 2:01 PM
    Looking at the Google results:


    Octopus Choice is a brand name of a company that is part of the Octopus Group which employs 600 people. The Group has been going for nearly 20 years. Another of their subsidiaries is the advisor to the Medicx IT which owns health centres and surgeries. They are authorised by the FCA.


    I notice that the Octopus Choice average return has been just over 4% which may imply that they avoid the riskier end of the business and an average loan of 600K whch is higher than Funding Circles maximum. So it would seem unfair to categorise them as smply another P2P option.


    It is purely in the property market but it is in the finance business rather than actually running and owning properties. You have some level of protection in that it was recommended by your IFA.


    If you want a better return than cash I think your choice is either this sort of investment for the short/medium term or to go for a proper broadly based investment portfolio which could be more appropriate for the longer term.
    • bxboards
    • By bxboards 13th Sep 18, 2:05 PM
    • 1,565 Posts
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    bxboards
    • #3
    • 13th Sep 18, 2:05 PM
    • #3
    • 13th Sep 18, 2:05 PM
    Get a new IFA, you are right to be concerned.

    Octopus Choice is fine, but its terrible advice for you to be told to just use only 1 P2P company for a lump sump.

    Have a look at the big P2P thread
    • Malthusian
    • By Malthusian 13th Sep 18, 2:40 PM
    • 4,639 Posts
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    Malthusian
    • #4
    • 13th Sep 18, 2:40 PM
    • #4
    • 13th Sep 18, 2:40 PM
    Get a new IFA, you are right to be concerned.

    Octopus Choice is fine, but its terrible advice for you to be told to just use only 1 P2P company for a lump sump.
    Originally posted by bxboards
    The dubious part is that the OP has apparently been told to use this as an alternative home for his cash savings. P2P is a high-risk product and should not be viewed as an alternative to cash.

    If on the other hand the OP and their IFA agreed that 40,000 was an excessive amount in cash and they should invest say 20k in P2P, and they already had 500,000+ invested in mainstream shares and bonds, that would be a different matter.
    • bxboards
    • By bxboards 13th Sep 18, 5:33 PM
    • 1,565 Posts
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    bxboards
    • #5
    • 13th Sep 18, 5:33 PM
    • #5
    • 13th Sep 18, 5:33 PM

    If on the other hand the OP and their IFA agreed that 40,000 was an excessive amount in cash and they should invest say 20k in P2P, and they already had 500,000+ invested in mainstream shares and bonds, that would be a different matter.
    Originally posted by Malthusian
    Regardless of the sum, it's poor advice to suggest investing a lump sum with just 1 P2P company IMHO.

    So for your example with 20k to invest, I'd be looking to spread that between 5 to 10 P2P companies, not just one. Helps diversify against platform failure.

    If I wanted to put in 40k for 'low risk' P2P, I'd probably be looking at Octopus Choice, Ratesetter, Assetz Capital, Landbay and Growth Street - all of those offer quick assess to money (with usual in 'normal market conditions' caveats), this would also raise the average from 4%-ish from Octopus Choice alone.
    Last edited by bxboards; 13-09-2018 at 5:34 PM. Reason: can't spell Octopus
    • firestone
    • By firestone 13th Sep 18, 7:26 PM
    • 269 Posts
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    firestone
    • #6
    • 13th Sep 18, 7:26 PM
    • #6
    • 13th Sep 18, 7:26 PM
    I am with Octopus choice and have been for 18 months they were my first P2P investment based on the idea and the hope that the parent company was a bigger player running VCT funds etc and so far i am happy(started small but invested more lately)
    I have had no problems with drawing money and have been running at about 4.2% and also using their auto invest monthly plan(they also pay out monthly)
    And now for the but - i would not put in 40000 in a lump sum and except to be able the get the whole amount back in one go because if invested for a while you will get late payments and defaults which means your money could be tied up till reclaimed or even at the worst lost.
    You should also note that the way OC,Landbay etc work as a large lump sum may not be spread over many loans so drip feeding could be better
    Also as others have said the whole pot in one place is a big risk
    • masonic
    • By masonic 13th Sep 18, 7:39 PM
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    masonic
    • #7
    • 13th Sep 18, 7:39 PM
    • #7
    • 13th Sep 18, 7:39 PM
    It was recommended by the IFA. I'm concerned about it because it seems to be concentrated solely in the property market.
    Originally posted by funkey_monkey
    There are few IFAs who would put all of an investors cash reserves in a single P2P platform. But you'd at least have recourse if you suffered a massive unexpected loss.
    • Malthusian
    • By Malthusian 14th Sep 18, 3:45 PM
    • 4,639 Posts
    • 7,414 Thanks
    Malthusian
    • #8
    • 14th Sep 18, 3:45 PM
    • #8
    • 14th Sep 18, 3:45 PM
    So for your example with 20k to invest, I'd be looking to spread that between 5 to 10 P2P companies, not just one. Helps diversify against platform failure.
    Originally posted by bxboards
    If you have to spread between 5-10 platforms then it's not doing the job of a platform. The point of a platform is to make it possible to diversify sufficiently to eliminate specific risk and the risk of total loss, without increasing administrative and time costs. A platform should be about having all your eggs in different baskets but one shed.

    I am aware of the reasons for doing it in P2P, and the reason is that P2P blurs the line between investing via a platform, investing in a collective fund and investing in a single company. Returns are partly dependent on the lending decisions of the P2P company (making it more like a fund than a platform) and things can go badly wrong if the P2P company itself goes belly-up (making it more like a single company). This is why diversification is necessary, and partly why I don't invest in P2P.

    Spreading 40,000 over 5-10 platforms is an unnecessary time cost for most investors.

    But I don't want this to become an argument about whether P2P is good or bad. I respect the views of those who understand the risks and find it meets their needs. What makes me suspicious is that this blurring of lines appears to have resulted in the OP being told to view P2P as part of their cash allocation rather than their fixed interest allocation. If true this is clearly unsuitable, whether you are pro or anti P2P.
    • aroominyork
    • By aroominyork 14th Sep 18, 6:46 PM
    • 642 Posts
    • 217 Thanks
    aroominyork
    • #9
    • 14th Sep 18, 6:46 PM
    • #9
    • 14th Sep 18, 6:46 PM
    Regardless of the sum, it's poor advice to suggest investing a lump sum with just 1 P2P company IMHO.

    So for your example with 20k to invest, I'd be looking to spread that between 5 to 10 P2P companies, not just one. Helps diversify against platform failure.

    If I wanted to put in 40k for 'low risk' P2P, I'd probably be looking at Octopus Choice, Ratesetter, Assetz Capital, Landbay and Growth Street - all of those offer quick assess to money (with usual in 'normal market conditions' caveats), this would also raise the average from 4%-ish from Octopus Choice alone.
    Originally posted by bxboards
    Similar but not quite the same as Malthusian, if you are so concerned about platform risk that would deal with 5-10 platforms each holding 2k-4k, I would suggest P2P isn't for you. Invest in something you have more confidence in.
    • masonic
    • By masonic 14th Sep 18, 7:13 PM
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    masonic
    Similar but not quite the same as Malthusian, if you are so concerned about platform risk that would deal with 5-10 platforms each holding 2k-4k, I would suggest P2P isn't for you. Invest in something you have more confidence in.
    Originally posted by aroominyork
    To be clear the platform risk is a risk with 100% loss potential. This is sector under "light touch" regulation, where there is no FSCS protection. If you aren't willing to diversify among platforms, then I'd suggest P2P isn't for you.

    I have my P2P investments spread around 6 main platforms, one of which is currently in Administration. After 6 months, it is not yet clear if it will be possible to recover records of how investor money was used (these were apparently destroyed), the legal status of the agreements made (an attempt to refinance one loan recently was aborted due to legal problems), or to what extent there will be money to distribute after Administrator fees (and the money the directors allegedly removed from the business just prior to filing for insolvency). Fortunately, P2P makes up a little over 10% of my investable assets, and this failed platform makes up less than 2%, so even if I lose the lot it won't be the end of the world.
    Last edited by masonic; 14-09-2018 at 7:16 PM.
    • aroominyork
    • By aroominyork 14th Sep 18, 7:21 PM
    • 642 Posts
    • 217 Thanks
    aroominyork
    To be clear the platform risk is a risk with 100% loss potential. This is sector under "light touch" regulation, where there is no FSCS protection. If you aren't willing to diversify among platforms, then I'd suggest P2P isn't for you.

    I have my P2P investments spread around 6 main platforms, one of which is currently in Administration. After 6 months, it is not yet clear if it will be possible to recover records of how investor money was used (these were apparently destroyed), the legal status of the agreements made (an attempt to refinance one loan recently was aborted due to legal problems), or to what extent there will be money to distribute after Administrator fees (and the money the directors allegedly removed from the business just prior to filing for insolvency). Fortunately, P2P makes up a little over 10% of my investable assets, and this failed platform makes up less than 2%, so even if I lose the lot it won't be the end of the world.
    Originally posted by masonic
    I agree with all that. I have 8% in P2P spread over three platforms.
    • short butt sweet
    • By short butt sweet 15th Sep 18, 3:19 AM
    • 9 Posts
    • 2 Thanks
    short butt sweet
    so ...


    all your p2p on 1 platform: serious platform risk, i.e. could lose the lot.


    use multiple p2p platforms: sounds like a lot of work to me; and there's still some platform risk (more than holding conventional investments on conventional platforms).


    why not just buy a high-yield bond fund (on a conventional platform) instead? that's what p2p is giving you (apart from unwanted platform risk ), viz. you're being paid high interest for taking on some credit risk.
    • masonic
    • By masonic 15th Sep 18, 8:24 AM
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    masonic
    why not just buy a high-yield bond fund (on a conventional platform) instead? that's what p2p is giving you (apart from unwanted platform risk ), viz. you're being paid high interest for taking on some credit risk.
    Originally posted by short butt sweet
    You could do exactly that, but high yield bond funds are quite well correlated to equities, bond prices are sensitive to interest rate movements, and offer returns of up to ~5%. The alternative would be to buy individual high yield corporate bonds and hold them to maturity. This would get eliminate the first two issues, but introduce another - that bond prices are already inflated so you'd need to buy your bonds at a premium and your yield to maturity will therefore be relatively low (also, this is lots of work).

    So P2P does offer an attractive alternative, in that you can buy into loans at par (but you do need to ensure you are being adequately compensated for risk), you can hold to maturity so returns are not linked to interest rate movements, and returns after bad debt can be higher.

    I have exposure to both corporate bonds and P2P.
    • firestone
    • By firestone 15th Sep 18, 8:37 AM
    • 269 Posts
    • 120 Thanks
    firestone
    so ...


    all your p2p on 1 platform: serious platform risk, i.e. could lose the lot.


    use multiple p2p platforms: sounds like a lot of work to me; and there's still some platform risk (more than holding conventional investments on conventional platforms).


    why not just buy a high-yield bond fund (on a conventional platform) instead? that's what p2p is giving you (apart from unwanted platform risk ), viz. you're being paid high interest for taking on some credit risk.
    Originally posted by short butt sweet
    In my case i am in bond funds(and its not like they don't have risk) and equity but i use a small % of P2P to diversify.But using your point i think having read P2P forums over the last few years that many people investing in P2P don't invest in the stock market at all.You see people saying they don't understand the markets or want a 50% loss
    Firms such as Ratesetter etc with their black box accounts appeal to people looking for a cash account they can set and forget (with or without the extra risk) and not have to follow such as a bond fund
    • firestone
    • By firestone 15th Sep 18, 8:52 AM
    • 269 Posts
    • 120 Thanks
    firestone
    Going back to the OP question and the issue of platform/investment risk.In theory Octopus should be one of the bigger more stable players in P2P and if the question had been should they invest in a Octopus VCT fund people would probably have said go passive or global or multi asset but possibly would not have mentioned the platform/fund manager
    Last edited by firestone; 15-09-2018 at 8:55 AM.
    • FatherAbraham
    • By FatherAbraham 15th Sep 18, 8:54 AM
    • 870 Posts
    • 636 Thanks
    FatherAbraham
    Regardless of the sum, it's poor advice to suggest investing a lump sum with just 1 P2P company IMHO.

    So for your example with 20k to invest, I'd be looking to spread that between 5 to 10 P2P companies, not just one. Helps diversify against platform failure.
    Originally posted by bxboards
    It's not just the headline-grabbing, stomach-churning, Masonic's-hair-white-overnight-turning case of utter platform meltdown that we're diversifying against.

    More mundane, and more likely, is the problem of all one's loans on a single platform having been priced and assessed using the same model.

    A mistake in the credit assessment technique employed by a platform will lead to systematic poor returns. Not exciting catastrophic meltdown, but a lower return than one had expected.
    • bxboards
    • By bxboards 15th Sep 18, 10:02 AM
    • 1,565 Posts
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    bxboards
    It's not just the headline-grabbing, stomach-churning, Masonic's-hair-white-overnight-turning case of utter platform meltdown that we're diversifying against.

    More mundane, and more likely, is the problem of all one's loans on a single platform having been priced and assessed using the same model.

    A mistake in the credit assessment technique employed by a platform will lead to systematic poor returns. Not exciting catastrophic meltdown, but a lower return than one had expected.
    Originally posted by FatherAbraham
    Absolutely, and I'm rather astonished at aroominyork in post 9.

    You should never puts all your eggs in one basket, regardless of invesment or asset class.

    I'm still surprised a professional IFA seems to be suggesting this, which is the point that is being lost if someone pulls out the 'it isn't for you' line, pulling that nonsense is so unhelpful on a discussion forum.
    • short butt sweet
    • By short butt sweet 15th Sep 18, 5:17 PM
    • 9 Posts
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    short butt sweet
    high yield bond funds are quite well correlated to equities, bond prices are sensitive to interest rate movements, and offer returns of up to ~5%. The alternative would be to buy individual high yield corporate bonds and hold them to maturity. This would get eliminate the first two issues
    Originally posted by masonic

    IMHO, it doesn't really eliminate them.


    the current market price of individual bonds will also fall if interest rates rise more than expected, or if it appears the borrower is more likely to default (either for general reasons e.g. the start of a recession, or because of issues specific to the borrower).


    you can decide to hold on and wait for a recovery; and, providing the borrower doesn't default, you'll get the return you originally expected when the bond is repaid.


    but you can also decide to hold on to a bond fund when it falls. and unless it loses money from defaults, you'll recover your losses by holding on for the average time to maturity of the bonds it holds (e.g. it holds bonds with an average of 5 years to maturity; interest rates rise unexpectedly, and the fund falls in value; you hold on to it for 5 years, and it will recover that paper loss).


    and p2p is subject to the same risks - viz. defaults, and being locked into a fixed interest rate when rates are hiked. it may appear uncorrelated, but isn't that just lack of liquidity?


    if the UK falls into a recession, p2p loans are more likely to default, so the market value of your p2p investments is lower. that may not be visible, if there isn't a secondary market, or it only allows trading loans at par, or it allows trading at other prices but what actually happens is that there are no buyers in the market so you can't see a meaningful price.


    and the same goes for owning a p2p loan at a fixed rate if interest rates rise more than expected. though AFAIK most p2p loans have pretty short terms, so this is a smaller effect. (so p2p would be most similar to a very-high-yield, very-short-term bond fund.)


    i think having read P2P forums over the last few years that many people investing in P2P don't invest in the stock market at all.You see people saying they don't understand the markets or want a 50% loss
    Firms such as Ratesetter etc with their black box accounts appeal to people looking for a cash account they can set and forget (with or without the extra risk)
    Originally posted by firestone

    yes, i suspect many people are using p2p because they don't know enough about better alternatives (e.g. bond funds, or equities funds).
    • masonic
    • By masonic 15th Sep 18, 5:21 PM
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    masonic
    IMHO, it doesn't really eliminate them.

    the current market price of individual bonds will also fall if interest rates rise more than expected, or if it appears the borrower is more likely to default (either for general reasons e.g. the start of a recession, or because of issues specific to the borrower).

    you can decide to hold on and wait for a recovery; and, providing the borrower doesn't default, you'll get the return you originally expected when the bond is repaid.
    Originally posted by short butt sweet
    Perhaps you didn't read the part where I said and hold them to maturity. Default risk is a different type of risk than the risk the bonds will drop in market value during their term. Buying individual bonds and holding until maturity does eliminate the risk that you will lose money due to interest rate rises or other causes of price fluctuation on the market.

    The mitigation to default risk is diversification and limiting your exposure to the higher risk investments. That's true of bonds, P2P and other forms of debt instrument.
    Last edited by masonic; 15-09-2018 at 5:30 PM.
    • short butt sweet
    • By short butt sweet 15th Sep 18, 5:25 PM
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    short butt sweet
    Perhaps you didn't read the part where I said and hold them to maturity.
    Originally posted by masonic

    no, i didn't. perhaps you missed the part where i said a bond fund would recover in the same way if held until the average maturity of the bonds it holds


    EDIT: yes, default risk is a different type of risk. perhaps it was a bad idea to mix discussion of it with interest rate risk, though i don't believe i've conflated them.
    Last edited by short butt sweet; 15-09-2018 at 5:37 PM.
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