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Post by chris on Feb 13, 2016 12:32:23 GMT
The risks for FK with its over-reliance on a single party were apparent and being discussed on this forum over a year ago, e.g.: Presumably AC see the QAA as a means of diversifying it's sources of funding. QAA now over £8M. QAA is one of a diversified list of sources of funding 
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Post by crabbyoldgit on Feb 13, 2016 19:52:35 GMT
sorry i am against selling at a premium , other sites where you have to live on line with fingers of the speed of a super hero leave me sub zero cold . AC offer a fair platform where ok with some dilligance and watching this forum you can get a small edge but those who have to be at work for a living the smaller investor on the whole get a fair crack of the whip. At some stage there will be a consolidation of this now new industry and the big boys will win and i hope ac is a big boy, but to be there they need mass investors and large numbers of loans that means mass market appeal. I was attracted to peer to peer because i was fed up with the big ie rich players taking all the rewards of risk and then giving the bill, ie me, the tax player the cost of failure. The simple investor wants a transparent clear funding process to reward investors and enable sme companies to have a reasonable fair credit line to enable them to borrows funds at a fair rate under stable reasonable terms so they to can make a profit. Anything that smacks of turning a fast buck by the churning loan parts at a rapid speed is not what i thought the ethos of peer to peer is. Premium selling i think will enable full time investors to make short term profits from other investors who cant sit on their laptop hour after hour to grab loan parts and sell on days later at 2 or 3% profit margins that type of site is not for me but maybe i am to soft.
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SteveT
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Post by SteveT on Feb 13, 2016 21:17:37 GMT
Exactly. If selling at a premium was enabled, the deeper-pocketed would increase their initial MLIA drawdown targets on new loans with the aim of selling on to newer lenders and those without free cash available later.
Next there'd be the request to permit multiple targets per loan, and the same flippers would have permanent targets set on most / all loans to buy anything that's offered at par or better whilst simultaneously offering to sell their parts at 2% / 3% / 4% premium.
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Post by chris on Feb 13, 2016 21:43:50 GMT
Exactly. If selling at a premium was enabled, the deeper-pocketed would increase their initial MLIA drawdown targets on new loans with the aim of selling on to newer lenders and those without free cash available later. Next there'd be the request to permit multiple targets per loan, and the same flippers would have permanent targets set on most / all loans to buy anything that's offered at par or better whilst simultaneously offering to sell their parts at 2% / 3% / 4% premium. Orders on the market are filled from the bottom up, so simply increasing your targets wouldn't get your a greater share. There's no gaming the system in that way. We also control, to a very large extent, availability at draw down and even throughout the loan to a lesser extent via the QAA. Underwriters have to sell a percentage of their holdings (typically 50% minimum) at par. Other underwriting sources are also forced to sell at par. Investment accounts will only trade at par (or buy at a discount). There are plenty of mitigants in place already that do make selling at a premium a future possibility, however at present it doesn't solve any particular problem for us or lenders. Until that changes we're very unlikely to enable the feature.
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SteveT
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Post by SteveT on Feb 13, 2016 21:53:38 GMT
Agreed, but currently there's limited incentive for MLIA lenders to pitch for any more than you plan to hold long term, as you can only sell at par, so many lenders will have targets rather less than the maximum MLIA allocation. And newer lenders can usually pick up plenty of shrapnel later at par, especially as other new loans launch. In a "premium selling" world, many MLIA lenders will raise their initial targets, so the maximum MLIA allocation would actually be lower. No one would miss out at the time of drawdown but "late arrivals" or those wanting to add to their accounts later would likely have to pay a premium for the privilege (very little of any "performing" loan is likely to be offered at par).
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Post by chris on Feb 13, 2016 22:11:57 GMT
The goal for the platform is, and has to be, a basic minimum of £2m of draw downs per week rising significantly from there over the course of the year. We have alternate funding sources which mean that doesn't all have to be retail, but our preference is for retail to drive that growth and we'll aim to give retail as much as it can swallow. We're still a couple of months away from achieving that as a constant stream of loans because we're still suffering from quite a lot of lumpiness in our drawdowns. That is the rate our pipeline is currently growing at though so it should just be a matter of time for that to filter through.
Against that backdrop new lenders should see a constant stream of loans allowing them to deploy their funds over the course of a few weeks into a diverse range of loans. From there they can then sell out of their larger holdings to diversify as new loans come on board, just as longer term lenders will do. Liquidity in the market place is driven by new loans which then causes lenders to reduce their holdings in older loans, and that includes with how the QAA invests and then releases loan units over time.
At the moment we don't have any issues attracting enough cash to each loan, and now that origination has been sorted we can skew our focus more towards growing our lender base so that should scale broadly in line with our deal flow. If that changes then allowing premiums to encourage lenders to invest in the way you have described is one option, and would be fulfilling a platform need as well as helping lenders overall by keeping a larger proportion of our origination allocated to retail investors. There may well be other scenarios where premiums would end up being beneficial and would see enough mitigants in place to make them a worthwhile edition to the platform.
However we're not in that situation currently and that's unlikely to change in the next few months unless growth in origination outstrips growth in our lender base.
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ablender
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Post by ablender on Feb 14, 2016 5:19:36 GMT
Agreed, but currently there's limited incentive for MLIA lenders to pitch for any more than you plan to hold long term, as you can only sell at par, so many lenders will have targets rather less than the maximum MLIA allocation. And newer lenders can usually pick up plenty of shrapnel later at par, especially as other new loans launch. In a "premium selling" world, many MLIA lenders will raise their initial targets, so the maximum MLIA allocation would actually be lower. No one would miss out at the time of drawdown but "late arrivals" or those wanting to add to their accounts later would likely have to pay a premium for the privilege (very little of any "performing" loan is likely to be offered at par). I have to disagree with you. On SS, with a par SM, many people buy more than they are going to hold long term just because they have a lot of money that they need to invest. A good interest rate is all that is needed for this. Par will allow for future diversification - so no premiums are needed.
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Post by chris on Feb 14, 2016 8:06:21 GMT
Agreed, but currently there's limited incentive for MLIA lenders to pitch for any more than you plan to hold long term, as you can only sell at par, so many lenders will have targets rather less than the maximum MLIA allocation. And newer lenders can usually pick up plenty of shrapnel later at par, especially as other new loans launch. In a "premium selling" world, many MLIA lenders will raise their initial targets, so the maximum MLIA allocation would actually be lower. No one would miss out at the time of drawdown but "late arrivals" or those wanting to add to their accounts later would likely have to pay a premium for the privilege (very little of any "performing" loan is likely to be offered at par). I have to disagree with you. On SS, with a par SM, many people buy more than they are going to hold long term just because they have a lot of money that they need to invest. A good interest rate is all that is needed for this. Par will allow for future diversification - so no premiums are needed. I personally don't think SS is currently a good data point as there seems to be a misplaced sense of risk as to their offering, possibly in part because of their old contracts where they were able to hide any defaults / missed payments. You have a current loan book where retained interest is creating the illusion that everything is fine but where lenders don't actually have a picture of what's likely to happen as all these loans approach term. They aren't going to stay default free and loss free forever and the scale of those defaults and / or losses will shape how lenders behave in future, which could either leave them being the same as now or have them adopting new strategies to manage their new found risks. Rate is also a contentious issue and SS have yet to see if they can make their model work long term. They have several risks ahead of them that we found out about the hard way last year which could leave them uncompetitive in the marketplace. Finding an increasing stream of high quality borrowers willing to pay the rates SS charge who will never default or cause a loss and who cannot get a better deal elsewhere is going to prove increasingly tough. Our platform and long term goals stretch beyond a simple "we'll pay everyone a flat 12%" and our market dynamics are going to be different.
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