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Post by stuartassetzcapital on Feb 22, 2018 15:15:10 GMT
Hi everyone. We have today taken live the new diversification algorithm for the non-Access Account accounts, i.e. GBBA, GEA,PSA.
Please bear with the system for a few days as it works through a large scale initial re-diversification routine after which you should all see far more balanced diversification in your investment account holdings from now on. Initial results in the first few hours or day or so may not be indicative of the final result merely as a function of the algorithm process.
Nonetheless we trust this will resolve the requirement from everyone for far better, balanced and faster diversification of investment account holdings and we apologise for the time it has taken for this upgrade.
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ashtondav
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Post by ashtondav on Feb 22, 2018 15:49:18 GMT
This is very good news. What will be the default diversification level?
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ceejay
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Post by ceejay on Feb 22, 2018 16:23:42 GMT
This is very good news. What will be the default diversification level? From what I've read of the posts on other threads, I suspect there isn't a simple answer to that question - at least not like "0.5%" as you might expect in discussion about FC, where there are huge numbers of loans to play with. Here, I think, their aim is to tend towards having all investors in a given fund having the same distribution across the loans, subject to some constraints (minimum account size to be participating, minimum chunk to exchange, and bad loans). This means that if a given loan represents X% of the total fund, then your holding should also tend towards X%, no matter what the value of X. Also, don't forget that this is just the rebalancing bit - they have not yet implemented the separate change to how an initial investment is allocated.
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happy
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Post by happy on Feb 22, 2018 16:28:10 GMT
I think that may depend in part on the total number of loans that are currently invested in by the fund. So for instance the GEA is a little light on suitable loans right now so probably 20 loans giving a best-case diversification of around 4-5%, the GBBA has around 50 so best case around 2%, the PSA should be able to do better with more loans. This would be the case if all loans had the same amount invested in each fund but obviously this is not the case with some large loans making up a larger percentage of the total account holding. However everyone in that account should tend towards the same percentage holding in each loan.
An example of this from my GEA, my largest holding (ignoring the obvious suspended suspects!) was 13.5% of my GEA. after todays initial rebalance this has reduced to around 6%. The system may well get this down a bit lower but based on the loans in that account I doubt it will go down much more than this.
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cb25
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Post by cb25 on Feb 22, 2018 16:29:34 GMT
This is very good news. What will be the default diversification level? From what I've read of the posts on other threads, I suspect there isn't a simple answer to that question - at least not like "0.5%" as you might expect in discussion about FC, where there are huge numbers of loans to play with. Here, I think, their aim is to tend towards having all investors in a given fund having the same distribution across the loans, subject to some constraints (minimum account size to be participating, minimum chunk to exchange, and bad loans). This means that if a given loan represents X% of the total fund, then your holding should also tend towards X%, no matter what the value of X. Also, don't forget that this is just the rebalancing bit - they have not yet implemented the separate change to how an initial investment is allocated. When I mentioned that my #227 allocation went from 2.8% to 7%, chris said that was the average. I'm unimpressed with that, but let's go with that for now. Then we have ton27 saying in p2pindependentforum.com/thread/11736/exchange-loan-unit "Following notification that the 'algorithm' was working ... in my GBBA - result a worse diversification than previous with one loan (441) having 35% whereas previously the biggest position was just 12%". Clearly didn't move towards a 7% average across investors. I suspect the moves are simply due to a) there's a lot of loan #227 available (more than £1/2m) and b) who has money that can be exchanged into it.
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Post by vaelin on Feb 22, 2018 16:30:20 GMT
This has already had an extremely positive impact on my diversification, and it is continuing to improve as the algorithm works its magic. I have had money sitting on the sidelines waiting for this to happen, which I am now very comfortable to in allocating to GBBA2.
Thanks for listening to your clients and introducing this feature!
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ceejay
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Post by ceejay on Feb 22, 2018 17:16:20 GMT
I wonder how thorough the diversification will be. If it is such that everyone ends up with the same amount of every loan, after adjusting for net deposits on platform, then AC might be accused of running a fund plus everyone would get the same return. (Just idle thoughts) I think the critical difference between this arrangement - essentially one that, within some constraints, allows loan chunk swapping between lenders - and a collective fund is that if you are holding a loan when it goes bad then the problem is yours. Sure, other people in the fund at the same time as you will probably have a very similar problem, but that bad loan element can't be sold, and incomers after the event aren't affected.
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daveb4
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Post by daveb4 on Feb 22, 2018 17:26:58 GMT
Happy so far with this.
One quite well diversified portfolio reduced my top 5 holdings by 1.5% and more specifically one very poor diversified top 5 by 22%!
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Post by Harland Kearney on Feb 22, 2018 17:31:18 GMT
I'm happy with the current dealings in my PSA; although some loans could use less weight but I think it will be interesting see how the system invests newly drawn down loans from already invested funds. Be good if they transfer some capital off the overweight loans into them. I'm going to be investing more into both GBBA2 and PSA over the next few weeks. Exciting  |
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registerme
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Post by registerme on Feb 22, 2018 17:35:35 GMT
My max GBBA1 holding is currently ~20% of the total  . GBBA2 is ~11% of the total. Maybe it's not got round to me yet? |
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cb25
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Post by cb25 on Feb 22, 2018 17:44:09 GMT
My max GBBA1 holding is currently ~20% of the total . GBBA2 is ~11% of the total. Maybe it's not got round to me yet? Which loans ?
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baz657
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Post by baz657 on Feb 22, 2018 17:54:36 GMT
There's always the MLA where you can put just a fiver on every available loan - that'll give a fair diversification.... or give it a few days and see where we stand. It seems to me that it's unfair to expect the system to "do its thing" in the space of just a few hours from being turned on.
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registerme
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Post by registerme on Feb 22, 2018 17:55:42 GMT
GBBA1 - #544 at ~20% (with #227 at ~10% and, #495 at ~8% and so on down). GBBA2 - #602 at ~11% (with #596 at ~9%) EDIT: I agree with baz657 above, my hope is that there's a batch running somewhere and it hasn't got to me yet. |
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cb25
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Post by cb25 on Feb 22, 2018 18:36:15 GMT
GBBA1 - #544 at ~20% (with #227 at ~10% and, #495 at ~8% and so on down). GBBA2 - #602 at ~11% (with #596 at ~9%) EDIT: I agree with baz657 above, my hope is that there's a batch running somewhere and it hasn't got to me yet. As I'm sure you know loan #227 is suspended, so won't be affected by the re-balancing (unfortunately as 30% of my GBBA1 is in that loan)
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Post by bikeman on Feb 23, 2018 9:40:02 GMT
My max GBBA1 holding is currently ~20% of the total . GBBA2 is ~11% of the total. Maybe it's not got round to me yet? You should get that out before AC screw you if it 'deems it necessary' to suspend those loans
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