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Post by jackpease on Dec 24, 2013 11:32:34 GMT
Does anyone else here have a toe in Assetz as well as FK? Why are there so many loan parts to be had on FK as opposed to Assetz - Many seem to be as good as Assetz?
Is it just a trust thing given Assetz' apparent rigour and transparency?
Jack
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oldgrumpy
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Post by oldgrumpy on Dec 24, 2013 11:50:50 GMT
Could it just be that FK like FC give the opportunity of buying in bulk at the auctions then selling off at a profit straight afterwards? Assetz does not act in that way, reselling being for convenience (no markup) rather than for profit.
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Post by mrclondon on Dec 24, 2013 11:55:57 GMT
Does anyone else here have a toe in Assetz as well as FK? Why are there so many loan parts to be had on FK as opposed to Assetz - Many seem to be as good as Assetz? Is it just a trust thing given Assetz' apparent rigour and transparency? Jack The fundamental difference between FK and Assetz is the Assetz loans are secured against real assets generally with a sensible LTV (loan to value) percentage, where as FK are unsecured loans many with a PG (personal guarantee). FK is similiar to FC whereas Assetz is similar to ThinCats. Lending on unsecured loans means there is a discreet risk of capital loss (the PG's have only notional value) and therefore to spread the risk you need to hold a huge number of very small loan parts in your portfolio; whereas lending on secured loans means there is a very much smaller risk of capital loss (although still the risk of loss of interest whilst the security is realised as cash). With secured loans holding fewer much larger loan parts is quite sensible. So all things being equal when a secured loan part appears on the Assetz or Thincats aftermarket it is likely that existing lenders to that company will consider topping up their portfolio (as well as new investors to the platform since the loan was written). But on FK or FC an existing lender is unlikely to be interested. But things are not equal .... both FK and FC create distortions in the primary market by allowing secondary market sales at a premium. This provides a route for "flippers" (short term traders) to take a substantial chunk of a loan on the primary market, and then offer it for sale on the secondary market at a premium. Whilst this is also true on Thincats to an extent, the sale fees there are very high and designed to discourage this. After consulting members of this forum via a couple of polls last month, Assetz have decided to allow sales at a discount on the aftermarket, but sales at a premium are not permitted. So when a loan part appears on the Assetz aftermarket it is still exactly as desireable as on the primary market, without having to pay the "flippers" premium. This market maker activity creaming off a proportion of the available profit from normal lenders is in my view the most disagreeable aspect of the P2B sector. To give a feel for my own perceptions of risk, I will not lend more than £100 on an unsecured loan (and generally much less), where as I'm happy with a few thousand on secured loans with a low LTV.
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Post by jackpease on Dec 24, 2013 14:03:01 GMT
Thanks - good explanation - i'd sort of come to the same conclusion as you albeit from gut feeling and limit myself to £100 for a FK loan and £1k for an assetz loan (if i get in in the first minute!). I tried to limit myself to £20 for FC loans reflecting the randomness of the whole thing but it ends up being too time intensive to screen out the junk!
jack
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Post by jackpease on Feb 28, 2014 8:15:31 GMT
The number of loans available on the Loan Exchange has been 1200+ in recent weeks - just checked and it has dropped to 830.
The increasingly high number was worrying me but it'd be good to know why its dropped by a third. Anyone with any ideas?
Jack
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wysiati
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Post by wysiati on Feb 28, 2014 11:21:36 GMT
The number of loans available on the Loan Exchange has been 1200+ in recent weeks - just checked and it has dropped to 830. The increasingly high number was worrying me but it'd be good to know why its dropped by a third. Anyone with any ideas? Jack This is typically due to the mass expiry of listings linked to repayment dates for the respective loans. Also, not all payments are made on the same day of the month (by number, e.g. 31st) so there are some more pushed into 28th February.
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wysiati
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Post by wysiati on Feb 28, 2014 11:48:58 GMT
The fundamental difference between FK and Assetz is the Assetz loans are secured against real assets generally with a sensible LTV (loan to value) percentage, where as FK are unsecured loans many with a PG (personal guarantee). FK is similiar to FC whereas Assetz is similar to ThinCats. Lending on unsecured loans means there is a discreet risk of capital loss (the PG's have only notional value) and therefore to spread the risk you need to hold a huge number of very small loan parts in your portfolio; whereas lending on secured loans means there is a very much smaller risk of capital loss (although still the risk of loss of interest whilst the security is realised as cash). With secured loans holding fewer much larger loan parts is quite sensible. So all things being equal when a secured loan part appears on the Assetz or Thincats aftermarket it is likely that existing lenders to that company will consider topping up their portfolio (as well as new investors to the platform since the loan was written). But on FK or FC an existing lender is unlikely to be interested. But things are not equal .... both FK and FC create distortions in the primary market by allowing secondary market sales at a premium. This provides a route for "flippers" (short term traders) to take a substantial chunk of a loan on the primary market, and then offer it for sale on the secondary market at a premium. Whilst this is also true on Thincats to an extent, the sale fees there are very high and designed to discourage this. After consulting members of this forum via a couple of polls last month, Assetz have decided to allow sales at a discount on the aftermarket, but sales at a premium are not permitted. So when a loan part appears on the Assetz aftermarket it is still exactly as desireable as on the primary market, without having to pay the "flippers" premium. This market maker activity creaming off a proportion of the available profit from normal lenders is in my view the most disagreeable aspect of the P2B sector. To give a feel for my own perceptions of risk, I will not lend more than £100 on an unsecured loan (and generally much less), where as I'm happy with a few thousand on secured loans with a low LTV. Even with loans secured on real/tangible assets the quality of that security and the prospects of successful realisation of value can vary markedly on a loan by loan basis, as some lenders to a ThinCats borrower which failed c.3 months into its loan term are unfortunately now discovering. Looking at a number of FC's specific asset security loans some of these have a starting effective LTV of 150%+ based on questionable valuations at that. It is not correct to suggest that any asset secured loan is necessarily safer than an unsecured loan offering. The entire security/recovery complex is one key area in which the respective platforms/intermediaries can differentiate themselves. W.r.t. 'flipping', Assetz Capital also effectively has flippers in the form of (some) underwriters but the means of remuneration is different, being the ongoing income stream from funded loans [EDIT: to clarify I am referring here to the additional life-of-loan payments underwriters receive based on their original commitment, a bit like old-style trail commission, which is in addition to the normal interest earned on any outstanding loan parts which are retained] which also provides incentives to ensure quick capital turn,rather than a one-time premium (less fees) secured upon sale in the secondary market. So there is an effective payaway (premium)to underwriters for each loan for which their services are required although one can debate from which party/ies that cut is taken. The qualification criteria are also much tougher on AC in terms of capital requirements per loan so there are currently fewer active players adopting that model. W.r.t ThinCats the views of key individuals, as in other areas, appear to differ regarding the fee structure on its secondary market and when I have asked the explicit motive of discouraging active trading, although present in some of the literature, was downplayed.
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wysiati
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Post by wysiati on Feb 28, 2014 12:06:09 GMT
Does anyone else here have a toe in Assetz as well as FK? Why are there so many loan parts to be had on FK as opposed to Assetz - Many seem to be as good as Assetz? Is it just a trust thing given Assetz' apparent rigour and transparency? Jack This is an area which forms part of the dilemma for FK. As a lender, why would you use FK? There are not yet enough new loan opportunities even to allow reinvestment of repayments with any meaningful degree of choice/discretion. Also, many of the borrowers already have loans on other platforms so you are left adding to existing exposures where the existing T&C's (e.g. at FC) may mean that an explicit agreement between the platforms is required whereby the FK loan and/or PG is effectively a lower ranking claim. Otherwise there is a greater risk that you get an adverse selection of borrowers applying to FK, although not necessarily being accepted (I do not think that I have yet seen any '5-shield' loans being listed), and the marginal rates available are (currently at least) lower than on a number of other platforms. Also, even if adopting a buy & hold model the liquidity in FK's secondary market is poor and the financial costs of exit (% fee on the entire loan part sale value and the failure to give any credit for accrued but unpaid interest) are among the highest. Combine that with a slow, cumbersome interface, and the distraction of managing funds on an additional platform, and I do now struggle (fwiw) to see the attractions.
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