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  • FIRST POST
    • funkey_monkey
    • By funkey_monkey 13th Sep 18, 1:11 PM
    • 353Posts
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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 2
    • masonic
    • By masonic 15th Sep 18, 5:46 PM
    • 10,108 Posts
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    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
    Originally posted by short butt sweet
    I didn't miss it, I just responded to the part of your post where you disagreed with me. I didn't take issue with the parts of your post I didn't quote.

    I maintain the view that holding individual bonds to maturity eliminates the risk that you will lose money due to interest rate rises or other causes of price fluctuation on the market.

    Coming back to your point that holding a bond fund for a sufficiently long period would achieve the same end, this is true providing the bond fund did not trade the bonds it held. In practice there is often a flight to the safety of lower risk bonds which crystallises losses. Nonetheless, there might be examples of funds in which this is true. It's little consolation though if you want to access the money in a specific timescale, when buying individual bonds would give a defined return on a set date, notwithstanding default risk.
    • short butt sweet
    • By short butt sweet 15th Sep 18, 6:07 PM
    • 121 Posts
    • 79 Thanks
    short butt sweet
    I maintain the view that holding individual bonds to maturity eliminates the risk that you will lose money due to interest rate rises or other causes of price fluctuation on the market.
    Originally posted by masonic

    OK. i suppose what i'm saying is that it isn't holding individual bonds (rather than bond funds) that eliminates the risk, it's holding on to maturity (whether of an individual bond or of a bond fund) that eliminates it.


    Coming back to your point that holding a bond fund for a sufficiently long period would achieve the same end, this is true providing the bond fund did not trade the bonds it held. In practice there is often a flight to the safety of lower risk bonds which crystallises losses. Nonetheless, there might be examples of funds in which this is true. It's little consolation though if you want to access the money in a specific timescale, when buying individual bonds would give a defined return on a set date, notwithstanding default risk.
    well, you can avoid the risk of the bond fund trading bonds by making it a bond tracker fund. if you pick an active bond fund, presumably that's because you think that the manager's trading will overall add rather than detract from value. i'm not totally against active bond funds, but in a sense they add in another kind of risk: manager risk.
    • masonic
    • By masonic 15th Sep 18, 6:17 PM
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    masonic
    OK. i suppose what i'm saying is that it isn't holding individual bonds (rather than bond funds) that eliminates the risk, it's holding on to maturity (whether of an individual bond or of a bond fund) that eliminates it.
    Originally posted by short butt sweet
    Agreed. Although the benefit with a ladder of individual bonds is that you get a return of capital at par even during times when prices are low.

    well, you can avoid the risk of the bond fund trading bonds by making it a bond tracker fund. if you pick an active bond fund, presumably that's because you think that the manager's trading will overall add rather than detract from value. i'm not totally against active bond funds, but in a sense they add in another kind of risk: manager risk.
    You mentioned specifically a high-yield bond fund when you introduced bonds to this discussion. To me that pretty much necessitates an active fund, but perhaps index trackers or ETFs now exist in this space (edit: on checking Trustnet, there are 32 high yield bond funds, none of which are trackers AFAICT; but one option in an ETF: BMO Barclays Global High Yield Bond GBP Hedged).
    Last edited by masonic; 15-09-2018 at 6:32 PM.
    • londoninvestor
    • By londoninvestor 15th Sep 18, 6:43 PM
    • 419 Posts
    • 342 Thanks
    londoninvestor
    well, you can avoid the risk of the bond fund trading bonds by making it a bond tracker fund.
    Originally posted by short butt sweet
    Will the same bond always make up the same proportion of the index all the way to its maturity though? Would the tracker fund "trade" the bond when the index weights are recalculated?
    • masonic
    • By masonic 15th Sep 18, 6:57 PM
    • 10,108 Posts
    • 7,392 Thanks
    masonic
    Will the same bond always make up the same proportion of the index all the way to its maturity though? Would the tracker fund "trade" the bond when the index weights are recalculated?
    Originally posted by londoninvestor
    Taking the only example of a passive high yield bond fund I could find (the ETF above, ZYHG), the KIID states: "The objective of this Exchange Traded Fund is to provide an exposure to global fixed-rate high yield bonds that have a maturity greater than one year and a minimum issue size of US$500m (or its equivalent in other currencies) which are hedged to sterling". So presumably it is rolling into longer dated bonds prior to maturity. Perhaps other passive bond funds also do this? I know some passive bond funds are long-dated and therefore wouldn't hold to maturity. I wasn't really able to glean any useful information about how the index was made up and what sort of portfolio turnover could be expected by constituents entering and leaving the index, or by their weights being recalculated. I did only skim-read the prospectus though.
    Last edited by masonic; 15-09-2018 at 7:02 PM.
    • short butt sweet
    • By short butt sweet 15th Sep 18, 7:02 PM
    • 121 Posts
    • 79 Thanks
    short butt sweet
    You mentioned specifically a high-yield bond fund when you introduced bonds to this discussion. To me that pretty much necessitates an active fund, but perhaps index trackers or ETFs now exist in this space (edit: on checking Trustnet, there are 32 high yield bond funds, none of which are trackers AFAICT; but one option in an ETF: BMO Barclays Global High Yield Bond GBP Hedged).
    Originally posted by masonic
    there are a few ETFs. another is: ishares global corp bond GBP hedged ETF (GHYS).



    Will the same bond always make up the same proportion of the index all the way to its maturity though? Would the tracker fund "trade" the bond when the index weights are recalculated?
    Originally posted by londoninvestor

    it's true index weights can be adjusted, mainly due to bonds being added to or removed from the index. which could lead to a small amount of "trading".


    however, that would generally involve adjusting the size of a holding, not changing it completely, so it's a smaller effect.


    Taking the only example of a passive high yield bond fund I could find (the ETF above, ZYHG), the KIID states: "The objective of this Exchange Traded Fund is to provide an exposure to global fixed-rate high yield bonds that have a maturity greater than one year and a minimum issue size of US$500m (or its equivalent in other currencies) which are hedged to sterling". So presumably it is rolling into longer dated bonds prior to maturity. Perhaps other passive bond funds also do this?
    Originally posted by masonic

    a number of bond trackers do hold bonds until they have 1 year to go, instead of actually to maturity. but IMHO that comes to almost the same thing. the price of a bond with 1 year to go is not exactly known, but it tends to be near to par value by then.
    Last edited by short butt sweet; 15-09-2018 at 7:11 PM.
    • masonic
    • By masonic 15th Sep 18, 7:09 PM
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    masonic
    there are a few ETFs. another is: ishares global corp bond GBP hedged ETF (GHYS).
    Originally posted by short butt sweet
    That looks like a more reasonable option than the one I found, thanks. Looks as though the index is constructed so as to minimise trading.
    • aroominyork
    • By aroominyork 16th Sep 18, 3:33 PM
    • 691 Posts
    • 235 Thanks
    aroominyork
    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.
    Originally posted by bxboards
    And I’m astonished at your response, especially as I also agree with everything FA says.

    Where did I advocate putting all your eggs in one basket? My point was this: if you want to put 20k into p2p and are going to spread across ten (or maybe even five) platforms that suggests a fundamental lack of confidence in the model and hence it might be best to avoid p2p altogether. As I said in a subsequent post, I have c.8% of my investments in p2p spread across three platforms – that seems a reasonable approach to managing the risk of p2p.

    Let me give an analogy. If you invest in active equity funds, you diversify across different regions/sectors/market caps etc. If you aim for exhaustive diversification you are essentially compiling a tracker but paying active management fees. So you would be better off not investing in active funds but just buying a low cost tracker. Similar with p2p – if you are trying to manage out all the risk, is it an asset type which is appropriate for you in the first place?
    • pmjenkins
    • By pmjenkins 16th Sep 18, 5:12 PM
    • 106 Posts
    • 38 Thanks
    pmjenkins
    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
    Originally posted by bxboards

    If you want to diversify across multiple P2P platforms with minimal effort you should look at Orca (www.orcamoney.com). They will split your investment across Assetz Capital, Landbay, Lending Crowd, Lending Works, Octopus Choice, and RateSetter. They target a return of 5%.
    • aroominyork
    • By aroominyork 16th Sep 18, 5:56 PM
    • 691 Posts
    • 235 Thanks
    aroominyork
    If you want to diversify across multiple P2P platforms with minimal effort you should look at Orca (www.orcamoney.com). They will split your investment across Assetz Capital, Landbay, Lending Crowd, Lending Works, Octopus Choice, and RateSetter. They target a return of 5%.
    Originally posted by pmjenkins
    Clever idea. Someone always comes up with a new way to take a cut, in this case 0.65%.
    • firestone
    • By firestone 16th Sep 18, 10:13 PM
    • 283 Posts
    • 129 Thanks
    firestone
    If you want to diversify across multiple P2P platforms with minimal effort you should look at Orca (www.orcamoney.com). They will split your investment across Assetz Capital, Landbay, Lending Crowd, Lending Works, Octopus Choice, and RateSetter. They target a return of 5%.
    Originally posted by pmjenkins
    If memory serves the number of platforms used depends on the amount invested
    • short butt sweet
    • By short butt sweet 17th Sep 18, 2:00 AM
    • 121 Posts
    • 79 Thanks
    short butt sweet
    If you want to diversify across multiple P2P platforms with minimal effort you should look at Orca. They will split your investment across Assetz Capital, Landbay, Lending Crowd, Lending Works, Octopus Choice, and RateSetter. They target a return of 5%.
    Originally posted by pmjenkins

    but then you're exposed to single-platform-risk with orca.


    in the sense that: if orca failed to keep client assets separate from their own, and then collapsed, you could lose everything, with no recourse to the FSCS for compensation.


    actually, you have 2 layers of that kind of risk. orca could fail to keep assets separate, or the platforms they are spreading your money across could fail to do it. it would be safer to spread your money across multiple platforms yourself.



    you're also exposed to platform risk with orca in the (less dramatic) sense that they could do a bad job at picking credible platforms to use and picking loans on platform and diversifying. what is their record at all this? they seem to have started this service this year.


    orca is apparently operating in what the FCA calls a "regulatory sandbox". is that reassuring? does the FCA know what a "sandbox" usually implies?



    why not go for the better-regulated approach, and buy a high-yield bond fund on a fully-regulated, not "sandbox", FSCS-protected platform? you could easily get a yield similar to the 5% which orca are targetting.
    • Malthusian
    • By Malthusian 17th Sep 18, 5:08 PM
    • 4,908 Posts
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    Malthusian
    orca is apparently operating in what the FCA calls a "regulatory sandbox". is that reassuring? does the FCA know what a "sandbox" usually implies?
    Originally posted by short butt sweet
    That it stinks of cat s!!!? (At the risk of a #thatsthejoke)
    • funkey_monkey
    • By funkey_monkey 18th Sep 18, 3:08 PM
    • 353 Posts
    • 25 Thanks
    funkey_monkey
    Just to clarify, after speaking with the IFA, he recommends it for only a portion of my 40k.

    However, I'm not sure what to do with the remainder which is returning below inflation currently.

    I've got 140k in S&S ISA
    60k in savings accounts for property
    40k in shares/Index linked cert/premium bonds

    I am considering putting 5k into Octopus Choice.
    This leaves 55k. What can I do with it to avoid it getting eaten away by inflation and yet remain as near cash?
    • funkey_monkey
    • By funkey_monkey 21st Sep 18, 10:18 PM
    • 353 Posts
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    funkey_monkey
    Any recommendations?
    • Alexland
    • By Alexland 21st Sep 18, 10:48 PM
    • 3,602 Posts
    • 2,930 Thanks
    Alexland
    Any recommendations?
    Originally posted by funkey_monkey
    There are no magic bullets. It sounds like your property purchase is going to be soon enough that S&S investment assets would be inappropriate. The best safe cash rates on lump sums run below inflation. P2P lending carries risk and while you can use multiple platforms you could find you are in an overall loss position if certain situations were to occur.

    The best option might be to just get on with the property purchase if possible?

    Alex
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