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Post by jonboy73 on Sept 20, 2016 11:50:44 GMT
Hi Wisealpha, couple of questions..
Hi Jonboy,
Our principal revenue stream is the 1% ongoing fee (taken from the interest payments) and the 0.25% sale fee. We don't take a margin on the bond price - we sell at the same price we purchase from the bank.
Ok thanks for that, I had gotten the info on pricing variance from your faq's where it mentions you may on occasion pay less or get a discount on the purchase. support.wisealpha.com/hc/en-gb/articles/200888571-What-fees-does-wiseAlpha-charge-to-members-
Twos further quick questions if I may..
If your primary income is the 1%, ignoring the .25% for now, I figure you will need to be managing circa £24Miliion of bonds to cover the £20k a month burn you mentioned excluding those of us on a 0% deal. Do you have a target date to reach this?
I see Virgin has all but sold out. with my reinvestment box ticked for this note, what will happen to the interest payments now? If I receive them into my account can these small amounts be reinvested by me into another note or is there a minimum to purchase?
Thanks again
and just wanted to say, great idea, I really like the site and wish you and the team all the best.
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Post by Wisealpha on Sept 20, 2016 12:15:26 GMT
Hi Jonboy,
There may be an instance in the future where we participate in an early syndication phase and the bank offers us some of the arranging fees for taking some of the amount of the loan prior to the full syndication process. We call that a concession fee in our FAQs. When that happens we will disclose that. Right now since we are mainly buying in secondary (after the initial syndication) that doesn't apply and we are selling at the price we pay the bank.
In terms of getting to a larger scale to cover the burn rate we'd like to get there as soon as possible and are working on bringing larger lenders in and linking to affiliate/IFA networks. Obviously, the faster the word spreads about us the faster we will grow - we're happy to build over 3-5 years like some of the other major P2P marketplaces but because of the quality of our product we hope we grow faster than that.
Virgin has sold out but we'll add some more of that going forward and some of our initial lenders we know may be willing to sell some and buy our next investment (sometime later this week). Investors in Virgin will continue to receive their interest - these will either be swept back into more of Virgin (if we get more before the next interest payment date) or you can re-invest the amounts in another name. The initial minimum size to invest is £100 per loan or bond but thereafter you can buy in denominations of a penny.
Thanks for your kind feedback - we hope to continue improving the site over-time and value feedback and suggestions.
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jaswells
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Post by jaswells on Sept 20, 2016 12:24:33 GMT
Wisealpha, along with the more standard p2p lending sites are all throwing up a challenge to some of the established patterns in the finance markets and the hold central bankers and institutional investors have over debt instruments. The criminality of a zero interest rate policy to 'stimulate' the economy should not be underestimated by the average personal saver trying to get by and save for later life. So far transparency by companies like wisealpha and a commitment to corporate responsibility is building trust which will be very hard earnt but easily lost. Keep up the good work.
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Post by propman on Sept 20, 2016 15:37:28 GMT
Thanks for your answers so far. Another question if you don't mind:
If you are buying large lot sizes and using them to back your own loan notes based on a portion of the original less your fee, I assume that you need to hold a stock of bonds in excess to that beneficially owned by investors (ie the bonds left to purchase). Am I correct in thinking that you are accruing the interest on these loans and so the accrued interest described above will increase (until you take your share of the next coupon payment). In addition, please explain how you account for the accrued fees on the capital during the life of the bond?
Many thanks
- PM
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Post by Wisealpha on Sept 20, 2016 16:01:31 GMT
Hi Propman,
Yes, we (and one or two other larger investors we know) hold a stock of the bonds in excess of that which is owned by the rest of our platform investors. As with all investors on the platform we take our share of the interest (accrued up until the next coupon payment). In terms of the accrued fees we run a daily accrual process which calculates the daily accrued interest and daily accrued fees payable by a member based upon their capital invested. Once the next coupon payment comes in we take accrued fees from it (if it is a 6 month coupon we take half the annual 1% fee from the interest payment). Hope that helps.
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Post by ablrateandy on Sept 20, 2016 19:30:31 GMT
Two comments (and take them as an interested investor not an embittered rival!!)
1. Interest rate changes DO affect the value of bonds. Or more precisely expectations of changes do...as do credit factors
2. Bond Syndicate desks don't provide concessions. The person selling to you as a third party may, but a syndicate desk cannot legally do that. Any investor on a new issue gets the same price
But great concept (just be careful how you phrase things!)
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Post by Wisealpha on Sept 20, 2016 20:33:43 GMT
Hi Ablrateandy,
Yes we agree BoE interest rate changes (and the expectation of interest rate changes) do affect bond prices all else being equal. Right now our opinion is that interest rates are likely to remain low for a good while and so this factor is not likely to be a major driver of bond prices in our segment. Bond desks don't provide concessions (perhaps an OID (price discount) to help get a deal away) but in the loan market (which is a private market and not a MIFID market) there are stages of early syndication at the time of underwriting where part of the arranging fees are offered which is what we mean by this but this is usually when you take down a decent chunk of the loan and have a regular relationship with an arranging bank. We're set up to buy both loans and bonds but right now mainly concentrating on bonds.
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Post by propman on Sept 21, 2016 7:35:48 GMT
Hi Propman, Yes, we (and one or two other larger investors we know) hold a stock of the bonds in excess of that which is owned by the rest of our platform investors. As with all investors on the platform we take our share of the interest (accrued up until the next coupon payment). In terms of the accrued fees we run a daily accrual process which calculates the daily accrued interest and daily accrued fees payable by a member based upon their capital invested. Once the next coupon payment comes in we take accrued fees from it (if it is a 6 month coupon we take half the annual 1% fee from the interest payment). Hope that helps. I thought that the fee was 1% of the interest and capital REPAID. So for a bond with 5 years left to run, that would be 0.2% of the nominal capital pa and 1% of the interest actually paid, or do you mean a 1% pa charge on the capital due on the bond and it is taken out of the interest?
- PM
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Post by Wisealpha on Sept 21, 2016 8:32:05 GMT
Hi Propman,
The easiest way to describe it is by using a simple example. If you invest £100 in a bond and the gross interest is 7% per annum paying a coupon every 6 months, we take £0.50 at each coupon date and over the year you earn £6 net and we earn £1. We take this fee every year.
Obviously you may buy in between coupon payment dates but we only take a pro rata amount of fees at each coupon date based upon how long you have held the bond.
Fees description from our website:
"Services Fee
WiseAlpha charges members an annual 1.00% Services Fee based on all amounts invested. We deduct this fee on a proportionate basis from interest payments made on the Notes. The Services Fee is deducted from the interest payment proceeds at the same time (or immediately after) they are deposited into your account. The Services Fee is rounded to the nearest whole penny in your account.
In this way we only receive our Services Fee when interest has been earned by our members. In the event that a borrower suspends its interest payments or misses a capital repayment wiseAlpha does not charge the Services Fee until payments are resumed.
Sale Fee
If members sell their Notes on the matched bargain "secondary market", wiseAlpha charges the member a 0.25% Sale Fee based on the principal amount of the Notes that are sold. We only charge the Sale Fee if your Notes are purchased by wiseAlpha on the basis described here , and we deduct this Sale Fee from the proceeds of the sale."
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blender
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Post by blender on Sept 21, 2016 10:00:48 GMT
Are you sure? Why is it different from FC where AIUI lenders are taxed on the gross interest and the fee is not deductible? AFAIK FC changed the T+C's to imply that the 1% fee is chargeable to the borrower, even though it still appears to go through the lender statement. At least I've been working to that theory, so does the tax statement produced by FC. blender or GSV3MIaC might be able to confirm with more confidence. Yes, FC tax statement states investment income in the following way:- "Total interest paid by borrower: Funding Circle servicing fee: Income payments made to you:"
So what is paid to lenders is net of the 1%. The way the platform operates has not been changed - probably a huge IT job - and presumably the amount of the 1% is only momentarily 'resting' in the lender transaction statements - as Father Ted might have said.
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Post by Wisealpha on Sept 22, 2016 11:23:20 GMT
We've just added a new bond to the site - Premier Foods (maker of Ambrosia, Angel Delight, Batchelors Soups, Bisto, Cadbury's cakes, Homepride, Lloyd Grossman, Lyons, Mr. Kipling, Oxo, Paxo and Sharwoods) Senior Secured 6.5% bonds due March 2021.
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shimself
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Post by shimself on Sept 23, 2016 19:45:07 GMT
We've just added a new bond to the site - Premier Foods (maker of Ambrosia, Angel Delight, Batchelors Soups, Bisto, Cadbury's cakes, Homepride, Lloyd Grossman, Lyons, Mr. Kipling, Oxo, Paxo and Sharwoods) Senior Secured 6.5% bonds due March 2021. Given that I'm happy to invest to the full term, can anyone say what could go wrong with this. OK they can go very very bust. what else?
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jaswells
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Post by jaswells on Sept 23, 2016 21:46:21 GMT
There is a risk with this type of investment but in my view very very small relative to other p2p type platforms. As with every site fraud stands out as the biggie and if everything turned out to be not quite as it seemed then there is potential for massive losses. There is only so much due diligence an investor can make. In Wisealpha's case so far so good, but they must remain in a position whereby they are at all times appearing to not trying to spin the operation or pull the wool over investors eyes. This is paramount to longevity of the platform. You can already see some minor p2p sites that have struggled with this and IMO will be the first to fail.
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jonah
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Post by jonah on Sept 24, 2016 6:52:50 GMT
Whilst I'm no expert in bonds... there are a few around here and their input would be greatly appreciated... I would assume that the normal issues could apply here, e.g if none inflation link and inflation rises then you can be stuck with money rotting away.
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lobster
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Post by lobster on Sept 24, 2016 7:08:45 GMT
We've just added a new bond to the site - Premier Foods (maker of Ambrosia, Angel Delight, Batchelors Soups, Bisto, Cadbury's cakes, Homepride, Lloyd Grossman, Lyons, Mr. Kipling, Oxo, Paxo and Sharwoods) Senior Secured 6.5% bonds due March 2021. Given that I'm happy to invest to the full term, can anyone say what could go wrong with this. OK they can go very very bust. what else? 1. Premier Foods can go bust (as you have said). 2. Wise Alpha could go bust - not sure what impact this would have on your holding but very messy to say the least.
3. Note that according to the website Yield To Maturity (YTM) is 5.9% , so after fees you would get approx 4.9%. Not a risk in itself as such, but just saying .....
4. If interest rates go up again, then 4.9% will look increasingly unattractive. Who knows - 2021 is 5 years away and a lot can happen.
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