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Post by Deleted on Mar 26, 2019 14:33:02 GMT
Hi
I'm considering selling my Zopa holding which is returning around 4%+0.5% early adopter (all in Core) and putting the money in RateSetter (6-6.5% in the 5 year market) and Marcus paying 1.5%.
If I put around 60% in RateSetter and the rest in Marcus, I should get a similar return overall and there should be quite a bit less risk as Marcus is FSCS protected and RateSetter has a provision fund for all loans (whereas only about one-third of my Zopa funds are covered by Safeguard). Zopa defaults have been increasing recently. Money would also be more accessible.
I know neither provision fund is a guarantee and it'll cost me 1-1.5% to sell out, but can anyone see any other downsides to this?
Thanks for your thoughts.
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r00lish67
Member of DD Central
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Post by r00lish67 on Mar 26, 2019 14:42:03 GMT
Hi I'm considering selling my Zopa holding which is returning around 4%+0.5% early adopter (all in Core) and putting the money in RateSetter (6-6.5% in the 5 year market) and Marcus paying 1.5%. If I put around 60% in RateSetter and the rest in Marcus, I should get a similar return overall and there should be quite a bit less risk as Marcus is FSCS protected and RateSetter has a provision fund for all loans (whereas only about one-third of my Zopa funds are covered by Safeguard). Zopa defaults have been increasing recently. Money would also be more accessible. I know neither provision fund is a guarantee and it'll cost me 1-1.5% to sell out, but can anyone see any other downsides to this? Thanks for your thoughts. Few things... You say 'money would be more accessible' but why? Zopa has a sellout feature, which you're presumably going to be using, and that costs 1% whilst Ratesetter 5yr is 1.5%. Both are subject to market demand as per usual, so isn't Z actually the more accessible of the two? Obvs your Marcus account would be far more accessible, but then it's an entirely different asset class. Re: accessibility again, if that's important to you then are you sure RS 5yr is right for you? If you withdraw after, say, 6 months then that's effectively a 3% annualised hit on your investment. Finally, the flipside of the RS model - you'll always get your stated return unlike Zopa (great), unless RS overall continue to miss their targets (they have been recently) in which case we all receive a haircut (and potentially game over for RS). I do invest with RS and not Z personally btw, but that's the risk one takes.
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Post by Deleted on Mar 26, 2019 15:08:03 GMT
Few things... You say 'money would be more accessible' but why? Zopa has a sellout feature, which you're presumably going to be using, and that costs 1% whilst Ratesetter 5yr is 1.5%. Both are subject to market demand as per usual, so isn't Z actually the more accessible of the two? Obvs your Marcus account would be far more accessible, but then it's an entirely different asset class. Re: accessibility again, if that's important to you then are you sure RS 5yr is right for you? If you withdraw after, say, 6 months then that's effectively a 3% annualised hit on your investment. Finally, the flipside of the RS model - you'll always get your stated return unlike Zopa (great), unless RS overall continue to miss their targets (they have been recently) in which case we all receive a haircut (and potentially game over for RS). I do invest with RS and not Z personally btw, but that's the risk one takes. Thanks for your reply. Re accessibility, I meant I could use Marcus to access funds in an emergency and maybe replace them with repayments from RS over time, so avoiding any charges or liquidity issues. I wouldn't plan on doing that, but you never know what can happen. It can take 2-3 weeks to sell loans in Zopa whereas from my small tests, RS is a lot quicker. At least the charge is fixed in RS, whereas Zopa is 1% plus a market adjustment which can vary a lot. I guess the issue is then how likely a loss is on RS and how it would compare to the defaults in Z. Only time will tell but the trend looks downwards for Z, based on my own experience and in threads here. I know the coverage is mainly downwards on RS. More food for thought. Thanks again.
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benaj
Member of DD Central
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Post by benaj on Mar 26, 2019 15:52:35 GMT
Hi I'm considering selling my Zopa holding which is returning around 4%+0.5% early adopter (all in Core) and putting the money in RateSetter (6-6.5% in the 5 year market) and Marcus paying 1.5%. If I put around 60% in RateSetter and the rest in Marcus, I should get a similar return overall and there should be quite a bit less risk as Marcus is FSCS protected and RateSetter has a provision fund for all loans (whereas only about one-third of my Zopa funds are covered by Safeguard). Zopa defaults have been increasing recently. Money would also be more accessible. I know neither provision fund is a guarantee and it'll cost me 1-1.5% to sell out, but can anyone see any other downsides to this? Thanks for your thoughts. My experience with 2 platforms have taught me these: - market adjustment rate is less than 0.3% in practice- Time to sell on Z could take more than 20 days depending on market condition - mine took longer than 3 months - Average loan term on Zopa is 42 months, compared to Ratesetter 27 months. So 5 year market ratesetter is not really tied in for 5 years, in fact a portion of RS loans can be repaid pretty early.- The amount you get back for selling on Z depends on how many loans in arrears and defaults, these loans can't be sold. - My experience in Selling loans on ratesetter are painless, as long as the loan parts are > £10 - Say selling 5 year market @ 5.8% (Low RS rate) loans on RS after 12 months, you make 4.3% profit when there is PF interest coverage - Zopa on the other hand, the amount you get from loan sale depends on the proportion of loans in arrears and defaults.
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Post by df on Mar 26, 2019 16:00:41 GMT
Few things... You say 'money would be more accessible' but why? Zopa has a sellout feature, which you're presumably going to be using, and that costs 1% whilst Ratesetter 5yr is 1.5%. Both are subject to market demand as per usual, so isn't Z actually the more accessible of the two? Obvs your Marcus account would be far more accessible, but then it's an entirely different asset class. Re: accessibility again, if that's important to you then are you sure RS 5yr is right for you? If you withdraw after, say, 6 months then that's effectively a 3% annualised hit on your investment. Finally, the flipside of the RS model - you'll always get your stated return unlike Zopa (great), unless RS overall continue to miss their targets (they have been recently) in which case we all receive a haircut (and potentially game over for RS). I do invest with RS and not Z personally btw, but that's the risk one takes. Thanks for your reply. Re accessibility, I meant I could use Marcus to access funds in an emergency and maybe replace them with repayments from RS over time, so avoiding any charges or liquidity issues. I wouldn't plan on doing that, but you never know what can happen. It can take 2-3 weeks to sell loans in Zopa whereas from my small tests, RS is a lot quicker. At least the charge is fixed in RS, whereas Zopa is 1% plus a market adjustment which can vary a lot. I guess the issue is then how likely a loss is on RS and how it would compare to the defaults in Z. Only time will tell but the trend looks downwards for Z, based on my own experience and in threads here. I know the coverage is mainly downwards on RS. More food for thought. Thanks again. If I'm not mistaken, RS also has market adjustment if you sell. But overall - 60% 5-year RS and 40% Marcus is significantly safer investment than Zopa Core (IMO).
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benaj
Member of DD Central
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Post by benaj on Mar 26, 2019 16:14:13 GMT
Forgot to mention,RS pays interest back from loan sale, Zopa does not return accrued interest, the accrued interest will be passed to another investors. Here is a break down on RS fees:- Capital returned: £123.91 Outstanding Interest : £0.49 Exit Value : £124.40 Fees (£1.85) Total £122.55 |
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r00lish67
Member of DD Central
Posts: 2,691
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Post by r00lish67 on Mar 26, 2019 16:14:33 GMT
Thanks for your reply. Re accessibility, I meant I could use Marcus to access funds in an emergency and maybe replace them with repayments from RS over time, so avoiding any charges or liquidity issues. I wouldn't plan on doing that, but you never know what can happen. It can take 2-3 weeks to sell loans in Zopa whereas from my small tests, RS is a lot quicker. At least the charge is fixed in RS, whereas Zopa is 1% plus a market adjustment which can vary a lot. I guess the issue is then how likely a loss is on RS and how it would compare to the defaults in Z. Only time will tell but the trend looks downwards for Z, based on my own experience and in threads here. I know the coverage is mainly downwards on RS. More food for thought. Thanks again. If I'm not mistaken, RS also has market adjustment if you sell. I don't believe it does. You can try it out by doing a test 'release your investment' on your 5 yr investments. The proposed fee for mine is 1.5% (to 1DP anyway). Detail here
"We are simplifying early withdrawal fees from 2 November 2017 by introducing a straightforward, single fee to transfer your loans to another lender. The Transfer Fee will be fixed for each market and will be a percentage of the capital being withdrawn (note that the fee will apply only to capital requested to be withdrawn, not interest). The Transfer Fee, which is shown in the table below, will be lower than the average fees incurred through sell out"
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Post by Deleted on Mar 26, 2019 17:25:17 GMT
Thanks all. Sounds like it should be lower risk with a similar, possibly more stable, return.
I hadn't considered the loss of accrued interest so guess that increases the effective sale cost by an average of half a month's interest (say 0.4%). Maybe 70/30 would be better to recoup the sale costs.
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