kaya
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Post by kaya on Apr 1, 2016 9:24:26 GMT
Yes, its that day of the year, and we all know that computer viruses cannot attack loanbooks to make loans default, so hopefully no censorship of the thread title need be applied, nor any platform get upset. But could a general increase in defaults spread through the p2p industry, spreading like a financial ebola, destroying both loans and confidance? At the moment we are seeing secondary markets, and primary markets, fill with loans that are becoming slower to sell. There is trouble down at Rebs, and we also see Fast Credit filling its loanbook with loans that often appear to be risky, but tempting some lenders ( and borrowers) with generous risk-bands.
So could there be trouble ahead? Could a rise in defaults, and a collapse in confidance, spread through the whole p2p industry like a viral infection? Should we be worried?
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Post by mrclondon on Apr 1, 2016 12:13:19 GMT
I think its worth a straight copy and paste of a post I made a couple of weeks ago
In time some of these platforms may become restricted to sophisticated investors when the masses complain about defaults which inevitably will happen.
Very perceptive.
I've thought for some time it more likely than not that within 3 to 5 years retail investors will be restricted to black-box provision fund backed "accounts" with a platform specified fixed indicative coupon (e.g. AC's GBBA, GEIA, QAA or W&Co, or a fixed rate RS) or options like FC's Investment Trust. Selection of individual loans would then be restricted to HNWI and Sophisticated investors, probably with a 4 or 5 figure minimum per loan.
The regulatory authorities will take little persuasion that many UK retail investors are not sufficiently "worldly wise" as to be able to assess the risk for themselves. I've said many times on here that with the p2p data currently available for modelling it would be foolish to expect more than 7% annual return on a well diversified portfolio of p2p loans across a full economic cycle, and it could well be less or indeed negative. the regulator will be forced to act sooner rather than later if lenders persist in believing returns greater than 7% pa are possible.
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Post by oldnick on Apr 1, 2016 12:14:43 GMT
I never stopped worrying. But I live with it because earning 1-2% on capital is worrying too.
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am
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Post by am on Apr 1, 2016 12:34:06 GMT
There already seems to have been a collapse in confidence. P2P Global is currently at a discount of well over 10%, way down from last year's ridiculous premium.
I've been wondering what the cause is, as last year's dividends were 59p, which is a roughly 7% yield on the current price, and there's reason to expect higher payments this year as the gearing takes positive rather than negative effect. Possible downsides that I've noted are
1) It invests worldwide, so runs the risk of capital losses in sterling terms from exchange rate movements.
2) It's geared, so returns would fall more rapidly in the event of an increase in the default rate.
3) It pays out interest rather than dividends, which currently has a greater tax cost for many people. (With the change from dividend tax credits to dividend allowances the calculations will change, but it will still be advantageous to many people to receive income as dividends rather than income.)
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am
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Post by am on Apr 1, 2016 12:40:11 GMT
By the way, a virus attack on p2p loanbooks could be read as a virus with a payload designed to break into your accounts - e.g. to put for your portfolios for sale on secondary markets at a discount for the waiting bots to hoover up. (People tell me that back end procedures make it difficult for people to steal money directly from your accounts, but I don't see anything to stop a hacked account being operated at a loss.)
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nick
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Post by nick on Apr 1, 2016 13:46:17 GMT
There already seems to have been a collapse in confidence. P2P Global is currently at a discount of well over 10%, way down from last year's ridiculous premium. I've been wondering what the cause is, as last year's dividends were 59p, which is a roughly 7% yield on the current price, and there's reason to expect higher payments this year as the gearing takes positive rather than negative effect. Possible downsides that I've noted are 1) It invests worldwide, so runs the risk of capital losses in sterling terms from exchange rate movements. 2) It's geared, so returns would fall more rapidly in the event of an increase in the default rate. 3) It pays out interest rather than dividends, which currently has a greater tax cost for many people. (With the change from dividend tax credits to dividend allowances the calculations will change, but it will still be advantageous to many people to receive income as dividends rather than income.) I think it just because investors are increasingly fretting about credit / default rate at the risker end of the market where most P2P loans are placed. I suspect we will see discounts widen before they get better until it becomes clearer where growth is going to come from.
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am
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Post by am on Apr 1, 2016 13:56:10 GMT
There already seems to have been a collapse in confidence. P2P Global is currently at a discount of well over 10%, way down from last year's ridiculous premium. I've been wondering what the cause is, as last year's dividends were 59p, which is a roughly 7% yield on the current price, and there's reason to expect higher payments this year as the gearing takes positive rather than negative effect. Possible downsides that I've noted are 1) It invests worldwide, so runs the risk of capital losses in sterling terms from exchange rate movements. 2) It's geared, so returns would fall more rapidly in the event of an increase in the default rate. 3) It pays out interest rather than dividends, which currently has a greater tax cost for many people. (With the change from dividend tax credits to dividend allowances the calculations will change, but it will still be advantageous to many people to receive income as dividends rather than income.) I think it just because investors are increasingly fretting about credit / default rate at the riskier end of the market where most P2P loans are placed. I suspect we will see discounts widen before they get better until it becomes clearer where growth is going to come from. Oh, I forgot 4) They've also got equity investments, and there's increased skepticism about platform valuations.
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nick
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Post by nick on Apr 1, 2016 14:02:13 GMT
I noticed that FC's fund is trading at a 7% discount to NAV. When/if markets start to fibrillate you'll notice that fringe asset classes such as P2P get disproportionally dumped. This affect is probably exacerbated by limited liquidity in these small cap funds/trusts
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Post by rebsrep on Apr 1, 2016 18:09:07 GMT
kaya: We disagree strongly that there is "trouble down at Rebs" Yes there has been a run of underperforming loans and as the similar thread on our subforum states there are other platforms with a similar bad run recently FC being specifically named in that thread. But we've put in place robust procedures to counteract this. See this thread: Statement by Rebs on DefaultsThere are a handful of loans with lots of discounted Secondary markets, but there are even MORE loans where you'll need to pay a premium or even no SM loans available at all because the loan is performing well. We also believe there is a big end of tax year effect, in February people were ploughing money into SIPPS expecting the Chancellor to restrict reliefs. In March money is of course going into ISA's. Many of the platforms are offering cash backs to fill loans at the moment, we expect to see more money flowing inwards in the next tax year. For my own portfolio in Rebs I have SM loans selling (so there are still people buying in) and I'm reinvesting in new loans and the SM loans where I'm underweight. We have confidence in our own platform.
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Post by davee39 on Apr 1, 2016 21:32:42 GMT
There already seems to have been a collapse in confidence. P2P Global is currently at a discount of well over 10%, way down from last year's ridiculous premium. I've been wondering what the cause is, as last year's dividends were 59p, which is a roughly 7% yield on the current price, and there's reason to expect higher payments this year as the gearing takes positive rather than negative effect. Possible downsides that I've noted are 1) It invests worldwide, so runs the risk of capital losses in sterling terms from exchange rate movements. 2) It's geared, so returns would fall more rapidly in the event of an increase in the default rate. 3) It pays out interest rather than dividends, which currently has a greater tax cost for many people. (With the change from dividend tax credits to dividend allowances the calculations will change, but it will still be advantageous to many people to receive income as dividends rather than income.) I have started buying in to this at the current discount, using funds withdrawn from FC My hope is that the downside is limited by 1) Proposed re-purchase of shares by the group to limit the discount. My guess is that this would kick in at 15%, which has almost been reached recently 2) The attraction of the yield 3) The generally minimal bid/offer spread. The spread on the FC trust is far too high. 4) The potential for rising values from platform stakes as more businesses achieve a stock market float. Please do not consider this as advice, unfortunately I have made some investment stinkers in the past.
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registerme
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Post by registerme on Apr 2, 2016 1:35:34 GMT
they just seem to be buy the market (i.e beta) in P2P loans. But that's their play, right?
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Post by ablrateandy on Apr 2, 2016 7:30:51 GMT
The problem is that there just wasn't enough supply over the last year so they were always going to perform in line. To outperform you need to have some form of choice. The fund I work with has some money in LC loans via a fund vehicle that got in very early that has some leverage and choice. It's performed reasonably well but we started pulling back from the vehicle a few months ago to take more control over where the money goes because even their range of choice was something we were less comfortable with as time went on.
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kaya
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Post by kaya on Apr 3, 2016 11:44:36 GMT
By the way, a virus attack on p2p loanbooks could be read as a virus with a payload designed to break into your accounts - e.g. to put for your portfolios for sale on secondary markets at a discount for the waiting bots to hoover up. (People tell me that back end procedures make it difficult for people to steal money directly from your accounts, but I don't see anything to stop a hacked account being operated at a loss.) Fair point, for such types of perceptions was the original post both modified/and moved after an objection!
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kaya
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Post by kaya on Apr 3, 2016 11:58:14 GMT
kaya : We disagree strongly that there is "trouble down at Rebs" Yes there has been a run of underperforming loans and as the similar thread on our subforum states there are other platforms with a similar bad run recently FC being specifically named in that thread. But we've put in place robust procedures to counteract this. See this thread: Statement by Rebs on DefaultsThere are a handful of loans with lots of discounted Secondary markets, but there are even MORE loans where you'll need to pay a premium or even no SM loans available at all because the loan is performing well. We also believe there is a big end of tax year effect, in February people were ploughing money into SIPPS expecting the Chancellor to restrict reliefs. In March money is of course going into ISA's. Many of the platforms are offering cash backs to fill loans at the moment, we expect to see more money flowing inwards in the next tax year. For my own portfolio in Rebs I have SM loans selling (so there are still people buying in) and I'm reinvesting in new loans and the SM loans where I'm underweight. We have confidence in our own platform. You are right Rebs, there are many dodgy defaulting loans at FC (of which I have a few), and I believe that this will only get noticably worse, given the way they are going. I sincerely hope that your platform is not in 'trouble', but when I see many loans being sold off at a discount (and good-looking loans at that, some of which I too have bought), and much more worryingly, see that the present loan applications are not filling (and I have supported one of them), I do indeed sense trouble, and I am hardly alone in that perception. If Rebs think that everything is fine, then nothing much changes, and that is a real concern of many, I suspect.
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Post by danraj on Apr 21, 2016 16:30:57 GMT
We've always been relatively small and slow-growing, it was nice to have a phase where we gained momentum, but we're currently focussed on obtaining our FCA Authorisation and supporting our software partners who contribute considerably to our revenue.
We'll continue making improvements to the platform and listing new opportunities for you to consider. Naturally we're committed to supporting our borrowers and where defaults occur, we'll see them through the enforcement process.
If you've not had an opportunity to try rebuildingsociety.com, then I'd invite you to give us a try. We're a nice team with our HQ in Yorkshire.
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