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Post by WestonKevTMP on Feb 4, 2017 10:30:57 GMT
Anthony Hilton: "Let’s be positive as peer-to-peer pain looms" in the Evening Standard 31st Jan 2017. Extract from larger article: "The problem that emerged last year was that RateSetter’s bad-debt experience was significantly worse than expected even in these good times. This briefly threatened to overwhelm the fund and, although some neat juggling meant disaster did not materialise, it did prompt a rethink about the scheme. "It's worth mentioning that Mr. Hilton was involved heavily in the early publicity for Relendex. He keeps this quiet, although I think he remains positive on P2P. But this statement is classic journalistic hyperbole. At no point was the Provision Fund under threat of being overwhelmed. Bad debts are paid and the reported fund level is net, i.e. cash left. It's always had ~£20m, give or take some current/contracted future split. The largest fund size globally in P2P. At no point has their been a panic or a requirement to " juggle" anything. And the widely reported expected bad debt experience being wrong gets my goat. I won't go into detail, but the reported expectations were based on 1st Jan expectations of a weighted average across risk grades. During the year the business purposely took on a different blend of higher risk loan segments, thus the resultant bad debt performance was higher when summed. However the bad debt expectations within each risk segment were correct. The mistake was not updating the 1st Jan number to reflect the actual blend of business segment that was booked. Whereas the other platforms did adjust their numbers, hence giving the impression of being better forecasters! There were some other one-off larger loan and business source issues, but nothing that would overwhelmed anything. And not related to the standard retail loan offering. Bah. Glad to get that off my chest. Kevin.
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Post by WestonKevTMP on Feb 4, 2017 9:53:49 GMT
WestonKevTMP . You say " ... lenders have benefited for 11 years of P2P lending. A much better performance than the stock market....". Sorry but since the start of 2006, the S&P has delivered total returns of 15.7% compounded, the MSCI Global Equity Index 12.7% and the FTSE ASX 10.5%. I was lending on Zopa from 2005/07 and 2009/13, and I just don't remember making those sorts of compounded returns. Have you started dealing in "alternative facts"? Arb, I forgot about the legendary pedantry accuracy of the forumites.... No fake news here! Badly worded. What I meant was that capital plus reduced interest specifically during 2008/2009 crisis compared well with the stock market. I meant that the fact they didn't shut up shop in 2008 meant that the were able to continue offering their services and have now done so for 11 years. Despite any issues with Zopa, many lenders (and the wider spawned industry) is thankful for that. Although yes over the long term historically equities do out perform most asset classes. Although it is obviously a rocky ride (" if you want to go faster, scream") and no guarantees in the future.... Kevin.
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Post by WestonKevTMP on Feb 2, 2017 17:56:44 GMT
I understand if you wish not to answer westonkev but would this be the direction that you didn't like that ratesetter were taking, either way obviously your views on this subject would be extremely valuable. I think it is a very good change. And very fair in terms of the fee-free get out. I mean even people that wanted out for whatever other unrelated reason can use this opportunity. When Zopa bad debt increased in 2008/2009 lender returns reduced to near zero, they had to use the lost interest to clear bad debt. But they preserved capital and continued trading, and now lenders have benefited for 11 years of P2P lending. A much better performance than the stock market.... Under the old rules, in a similar circumstance RateSetter would be forced to call a resolution event and ultimately close. This would mean the end of a good platform with excellent longer term prospects, and possibly worse returns because the platform would have reduced incentive to maximise portfolio returns. This change gives management the ability to continue trading. Perhaps reduced interest, but not a black or white decision on continue or call call a Resolution Event (and near certain end to the platform). And even in calling a Resolution Event, they could get this wrong if expected bad debt isn't as bad as previously forecast. It would be the end of a good platform when it wasn't actually needed. A Resolution Event call also removes the ability to manage their way out of any problems through cost cutting or increasing Provision Fund contributions on future loans to cover the under allocation of the past. All said, I think this is a very sensible change. The Resolution Event made sense at launch, but now 6 years later it needed a change to be more practical of potential reality. Kevin.
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