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Post by aroominyork on Dec 9, 2018 11:20:41 GMT
I phoned FC last week as my account was showing an annualised return (on the Balanced option) of 4.4% with £2395 of earnings and £1215 of losses, and a estimated return of 7.1%. I asked whether, since I clearly had a higher than average level of bad debts, the 7.1% calculation took that into account or was the same figure shown to all investors with my level of investment and loan diversification.
I spent over five minutes on the call and have no idea what the answer was; I was given a beautifully constructed circuitous answer. So I called again a couple of days later and had a similar conversation. I am reasonably sure the bottom line is that I should not expect 7.1%.
So I have two questions. First, do I have an unlucky loan book or are most people experiencing losses to the level of half their earnings? Second, what is other people’s experience of FC’s way of answering this type of question?
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Stonk
Stonking
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Post by Stonk on Dec 9, 2018 16:20:58 GMT
The estimated return figure is theoretical. For each risk band, FC have an expected level of defaults. Your estimated return is the weighted average of the rate on each of your loan parts, where each loan's rate has been reduced according to its expectation of default, and fees have been deducted. If you transplanted your exact portfolio to another user, the estimated return displayed to them would be the same: the calculation is purely forward-looking and does not involve anything historical.
The estimated return is the yield you can "expect" ... provided two very big IFs come true: (a) you experience average levels of defaults; (b) FC's expected levels of defaults are correct.
On the other hand, the annualised return is calculated based on your own portfolio's past performance since you began on FC. Personally, mine is showing about the same as yours, in the mid-4%'s. My losses are a substantially higher proportion of my earnings. In fact, I've earned virtually nothing in the last 12 months (a month ago I calculated I was up 0.4% for the prior year). The only reason it's showing in the 4%'s is because it's an all-time figure (I would much prefer a rolling-year figure). I would say that you and I have had worse than average luck ... but we are far from the only ones. There appear to be very wide deviations from the mean.
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Post by aroominyork on Dec 10, 2018 8:49:39 GMT
Thank you, Stonk. Your second paragraph is what FC were working very hard to avoid saying.
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Post by hammertime on Dec 10, 2018 11:11:51 GMT
Defaults at F/C have been awful for at least 18 months. Which was when i decided to leave them they don't seem any better now. I put my cash into A/C and i'm getting 11% with no problems.
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Post by Ace on Dec 10, 2018 17:12:06 GMT
Defaults at F/C have been awful for at least 18 months. Which was when i decided to leave them they don't seem any better now. I put my cash into A/C and i'm getting 11% with no problems. 11% with AC is impressive. Is that an XIRR? If so, does it include some bonuses? I can't see how to achieve that otherwise with any degree of diversification.
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Post by aroominyork on Dec 10, 2018 19:40:03 GMT
Has anyone assessed/posted default rates across different types of loan across different p2p sites?
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benaj
Member of DD Central
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Post by benaj on Feb 8, 2019 20:24:55 GMT
I phoned FC last week as my account was showing an annualised return (on the Balanced option) of 4.4% with £2395 of earnings and £1215 of losses, and a estimated return of 7.1%. I asked whether, since I clearly had a higher than average level of bad debts, the 7.1% calculation took that into account or was the same figure shown to all investors with my level of investment and loan diversification. I spent over five minutes on the call and have no idea what the answer was; I was given a beautifully constructed circuitous answer. So I called again a couple of days later and had a similar conversation. I am reasonably sure the bottom line is that I should not expect 7.1%. So I have two questions. First, do I have an unlucky loan book or are most people experiencing losses to the level of half their earnings? Second, what is other people’s experience of FC’s way of answering this type of question? I have recently done an XIRR on my partner's 7 year's FC account. Here's the XIRR in stage 2012 Nov - 5.31% 2013 Apr - 7.81% 2013 Oct - 6% 2016 Aug - 6% 2017 Apr - 7.1% 2017 Nov - 6.9% 2018 Apr - 6.58% 2018 Sep - 6.38% 2019 Feb - 6.29%, but the stated annualised return on FC summary page is 6.5% So, the performance follows similar pattern to FC return in their statistics page.
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Stonk
Stonking
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Post by Stonk on Feb 8, 2019 22:48:15 GMT
I have recently done an XIRR on my partner's 7 year's FC account. Here's the XIRR in stage 2012 Nov - 5.31% 2013 Apr - 7.81% 2013 Oct - 6% 2016 Aug - 6% 2017 Apr - 7.1% 2017 Nov - 6.9% 2018 Apr - 6.58% 2018 Sep - 6.38% 2019 Feb - 6.29%, but the stated annualised return on FC summary page is 6.5% So, the performance follows similar pattern to FC return in their statistics page.
Are these "all-time" XIRR figures, from the start date to each date, or the XIRR attained between each pair of dates?
If they are all-time figures, I wonder what the XIRR is over just the last 2 years. I imagine it must be down quite a bit, to have eroded a 5-year figure of 7.1% into a 7-year figure of 6.29%.
Either way, I can only dream of such numbers from FC!
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benaj
Member of DD Central
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Post by benaj on Feb 8, 2019 22:50:07 GMT
from start to each date
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p2pete
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Post by p2pete on Feb 10, 2019 12:30:13 GMT
4.4% with £2395 of earnings and £1215 of losses In addition to the losses there are suspended loans that will usually end up as losses. Make a note of your 'lent out' figure and then click on the Sell tab to see the sellable amount. The difference gives you the amount of suspended loans you have (late, downgraded etc). You'll get some losses back as recoveries, but not much.
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ashtondav
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Post by ashtondav on Feb 11, 2019 11:49:01 GMT
Defaults at F/C have been awful for at least 18 months. Which was when i decided to leave them they don't seem any better now. I put my cash into A/C and i'm getting 11% with no problems. 11% with AC is impressive. Is that an XIRR? If so, does it include some bonuses? I can't see how to achieve that otherwise with any degree of diversification. You can’t get an IRR of 11% in AC. End of.
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ashtondav
Member of DD Central
Posts: 1,805
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Post by ashtondav on Feb 11, 2019 11:56:28 GMT
I phoned FC last week as my account was showing an annualised return (on the Balanced option) of 4.4% with £2395 of earnings and £1215 of losses, and a estimated return of 7.1%. I asked whether, since I clearly had a higher than average level of bad debts, the 7.1% calculation took that into account or was the same figure shown to all investors with my level of investment and loan diversification. I spent over five minutes on the call and have no idea what the answer was; I was given a beautifully constructed circuitous answer. So I called again a couple of days later and had a similar conversation. I am reasonably sure the bottom line is that I should not expect 7.1%. So I have two questions. First, do I have an unlucky loan book or are most people experiencing losses to the level of half their earnings? Second, what is other people’s experience of FC’s way of answering this type of question? 4.4%. That’s about twice the risk free rate of return. It may not be FC’s estimate, but it’s a pretty good return, after tax meeting or beating inflation. As for me, I joined when FC ditched the flippers and have an annualised return of 6.4% on 750 loans.
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