|
Post by justanotherlender on Jul 22, 2016 10:51:54 GMT
I have a significant (to me, anyway) sum lent via RateSetter, and I very much welcome independent journalists taking a sceptical look at the RS figures. I will judge RS as much by the tenor as the content of their response. Seeing comments here which even hint toward the quality of such journalism are extremely disturbing. I expect RS to respond with full vigor, openness and transparency (as they generally have, to date). To see anybody from RS attack the messenger will only reveal a lack of confidence in the arguments, and hence the trustworthiness of your business. Don't go there, please.
|
|
|
Post by propman on Jul 22, 2016 14:38:39 GMT
Doesn't read well whichever way you look at it. Certainly not adding to investments in 5yr sub 6%ish. I like RS more than all p2p but I've downgraded my feelings to comfortable (ish) from comfortable. Pretty much sums it up for me too. Not time for a panic sell-out (yet), but I'm certainly not reinvesting at these rates with the PF on its current trajectory. So I'm just withdrawing capital from RS as it comes due. A sudden 20% jump in expected claims does not inspire confidence. Interesting. It does actually give me more confidence, especially comforting after they removed their bad debt estimates as comparisons to the actual bad debts that I did find worrying. I have been saying for some time that their bad debt provisioning looked over optimistic. Pretending that all was well and only slowly changing bad debt expectations as loans 18+ months old revealed a shortfall appeared a little too "head in sand" to me.
RS has bitten the bullet and confirmed that the higher bad debts they have experienced on loans made from May 2014 onwards cannot prudently be ignored. In addition, announcing a coverage ratio target where we are at the bottom currently suggests they will raise this over time giving more security to lenders.
I really worry that the PF gives a misleading impression to less sophisticated lenders as it turns the product into one approaching the precipice bonds that Aberdeen & others marketed as "safer investments" so disasterously some time ago. "Past performance is not a guide to future performance" has been made such a cliché that most investors overlook it. As a result, I fear that many may be lending believing that they are all but certain to receive the headline interest rate merely because in benign conditions this has always been so. As has been commented on by many, tail risks are poorly factored into investment decisions (and often ignored completely). RS have essentially created a model where the only risks are tail risks. Anything that highlights their existence has to be helpful. Now we see that the only buffer on the fund above a realistic expectation of defaults is the future income from existing loans, I hope more investors think about these risks.
- PM
|
|
jonah
Member of DD Central
Posts: 2,031
Likes: 1,113
|
Post by jonah on Jul 22, 2016 19:33:13 GMT
If more people withdraw cash upon repayment, surely that would drive up rates offered to lenders. Almost like a market...
|
|
|
Post by stevepn on Jul 22, 2016 21:33:38 GMT
If more people withdraw cash upon repayment, surely that would drive up rates offered to lenders. Almost like a market... Lenders rates might go up but if rates go up so will borrowers rates possibly leading to more default payments.
|
|
jimc99
Member of DD Central
Posts: 284
Likes: 115
|
Post by jimc99 on Jul 23, 2016 0:10:58 GMT
Bye bye USP. Bye bye ratesetter?
|
|
pikestaff
Member of DD Central
Posts: 2,140
Likes: 1,486
Member is Online
|
Post by pikestaff on Jul 23, 2016 7:02:16 GMT
Pretty much sums it up for me too. Not time for a panic sell-out (yet), but I'm certainly not reinvesting at these rates with the PF on its current trajectory. So I'm just withdrawing capital from RS as it comes due. A sudden 20% jump in expected claims does not inspire confidence. Interesting. It does actually give me more confidence, especially comforting after they removed their bad debt estimates as comparisons to the actual bad debts that I did find worrying. I have been saying for some time that their bad debt provisioning looked over optimistic. Pretending that all was well and only slowly changing bad debt expectations as loans 18+ months old revealed a shortfall appeared a little too "head in sand" to me.
RS has bitten the bullet and confirmed that the higher bad debts they have experienced on loans made from May 2014 onwards cannot prudently be ignored. In addition, announcing a coverage ratio target where we are at the bottom currently suggests they will raise this over time giving more security to lenders.
I really worry that the PF gives a misleading impression to less sophisticated lenders as it turns the product into one approaching the precipice bonds that Aberdeen & others marketed as "safer investments" so disasterously some time ago. "Past performance is not a guide to future performance" has been made such a cliché that most investors overlook it. As a result, I fear that many may be lending believing that they are all but certain to receive the headline interest rate merely because in benign conditions this has always been so. As has been commented on by many, tail risks are poorly factored into investment decisions (and often ignored completely). RS have essentially created a model where the only risks are tail risks. Anything that highlights their existence has to be helpful. Now we see that the only buffer on the fund above a realistic expectation of defaults is the future income from existing loans, I hope more investors think about these risks.
- PM
The articles refer to data that RS itself has published and there is nothing new here. However, anything that reminds lenders of the risk that a resolution event could be called is no bad thing. Lenders' capital does not face a precipice, but their liquidity does. So does RS's business. The latter is why RS will do all that they can to make sure it won't happen. I'm glad to see the more prudent provisioning, and RS's transparency on this is one reason why I'm comfortable with lending on RS - particularly on the 5 year market. I'm not convinced that the rates on the shorter markets (especially the rolling market) properly reflect the liquidity risk.
|
|
spiral
Member of DD Central
Posts: 910
Likes: 456
|
Post by spiral on Jul 23, 2016 7:50:35 GMT
Lenders' capital does not face a precipice, but their liquidity does. So does RS's business. ......................... I'm not convinced that the rates on the shorter markets (especially the rolling market) properly reflect the liquidity risk. I think you've hit the nail on the head here. Most people worry about loss of capital, the reality is that on RS, that is likely to be minimal if it ever occurs. The real risk at those times is liquidity and particularly the rolling market. If you're in the 5yr market, it wouldn't be too much of a shock to your system if you didn't get too much back until the end of 5 yrs. If you thought you had an "instant access" account and it was withheld for months or even years, it would be a much greater shock and therefore like you, I believe that current rolling rates don't reflect that risk.
|
|
|
Post by westonkevRS on Jul 23, 2016 15:34:49 GMT
I have a significant (to me, anyway) sum lent via RateSetter, and I very much welcome independent journalists taking a sceptical look at the RS figures. I will judge RS as much by the tenor as the content of their response. Seeing comments here which even hint toward the quality of such journalism are extremely disturbing. I expect RS to respond with full vigor, openness and transparency (as they generally have, to date). To see anybody from RS attack the messenger will only reveal a lack of confidence in the arguments, and hence the trustworthiness of your business. Don't go there, please. The FT journalist came into the RateSetter office last week so that a better explanation could be given of how things work. He updated his FT Alphaville report, which although wasn't totally positive and rightly included warnings about capital and that the Provision Fund provides no guarantees, was more upbeat/positive. He now seems to understand the RateSetter Op model better. Kevin.
|
|
hendragon
Member of DD Central
Posts: 631
Likes: 619
|
Post by hendragon on Jul 23, 2016 16:04:36 GMT
shouldn't the journalist have done that BEFORE writing the original article?
|
|
|
Post by nutfield on Jul 23, 2016 16:37:01 GMT
The trouble with these articles, and with the moaners about Brexit for that matter, is that their worrying could become a self fullfiling prophesy.
|
|
ashtondav
Member of DD Central
Posts: 1,805
Likes: 1,087
|
Post by ashtondav on Jul 23, 2016 18:31:41 GMT
I will never understand why RS went down the Resolution Event road, where the business effectively ends if the event is triggered.
I was with ZOPA in 2008 when they faced a Tsunami of bed debt. We all moaned but we all made money over 5 year periods - and that was without PF or SG protection. Why will RS call time at just the wrong time?
Goodness, even with 50% defaults i'd still be looking at 3%pa
|
|
|
Post by GSV3MIaC on Jul 23, 2016 20:43:28 GMT
Probably because there is no other way to 'fair share' the protection (fund) between the various loan classes and individual lend orders (how much 'hair cut' do 'rolling' investors get to take in month1, vs 5 year holders in 60 months time?). Actually RS will obviously try to fill up the PF faster than it empties, to avoid a resolution event. If/when they can't do that then it is game over anyway.
Your 3% at ZOPA is about what the rolling market is currently delivering WITH a PF, without it people would surely want more (ZOPA headline rate back then was what? 7 or 8%?)
|
|
agent69
Member of DD Central
Posts: 5,642
Likes: 4,214
|
Post by agent69 on Jul 24, 2016 9:15:01 GMT
ZOPA headline rate back then was what? 7 or 8%? Ah - the good old days
|
|
adrianc
Member of DD Central
Posts: 9,045
Likes: 4,841
|
Post by adrianc on Jul 24, 2016 9:18:20 GMT
The trouble with these articles, and with the moaners about Brexit for that matter, is that their worrying could become a self fullfiling prophesy. It's very easy to dismiss things as a self-fulfilling prophecy when they were actually accurate predictions that were inaccurately dismissed. FWIW, I think your examples are at different ends of that scale.
|
|
|
Post by propman on Jul 25, 2016 7:37:54 GMT
The articles refer to data that RS itself has published and there is nothing new here. However, anything that reminds lenders of the risk that a resolution event could be called is no bad thing. Lenders' capital does not face a precipice, but their liquidity does. So does RS's business. The latter is why RS will do all that they can to make sure it won't happen. I'm glad to see the more prudent provisioning, and RS's transparency on this is one reason why I'm comfortable with lending on RS - particularly on the 5 year market. I'm not convinced that the rates on the shorter markets (especially the rolling market) properly reflect the liquidity risk. By "Precipice" I was referring to everything goes from full interest paid to a much smaller amount of interest and possibly further losses depending on whether the resolution event reduces recoveries / increases costs charged to the PF (I am not clear how well future contributions to PF are ring fenced to lenders and what limit there is for costs to be charged to PF). For those of us with higher than average rate loans, a resolution event would reduce the rate to the market average even if all interest was subsequently recovered. That alone is a sharp drop in future returns if not a loss of capital.
|
|