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Post by reeknralf on Sept 23, 2017 7:52:22 GMT
Re 1 some defaults are handled quickly and its only a special case that would drag out that long. We have posted on this in great detail a few minutes ago on other threads. Re 2 this is indeed how it works as even if an investor currently has a substantial exposure to a single defaulted loan (soon to be improved though) the provision fund fully covers that at present for example so no unfairness. The Defaults and losses webpage shows coverage and coverage is a multiple (>1) of known and expected losses on that investment accounts' holdings as of today and indeed ever since launch. Is the provision fund going to payout on the suspended loan that I am now substantially invested in? Can I sell my holding in that suspended loan that I had no choice in 'investing' in? Will AC diversify my holding in that suspended loan? No? Thought not. As to your answer to 2, It is BS that all GEIA investors equally share the exposure to suspended loans. I know of other investors in the GEIA that are not invested in the suspended loans I have. I am fed up with hearing about a provision fund which never pays out and a system that locks my money into bad loans with no means of exiting from them. I can sympathise with the frustrations at the GEIA, but if you want an account where you don't get locked into bad loans, AC have two QAA accounts. It would obviously be nice to have easy access and 7%....
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ashtondav
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Post by ashtondav on Sept 23, 2017 8:25:31 GMT
Is the provision fund going to payout on the suspended loan that I am now substantially invested in? Can I sell my holding in that suspended loan that I had no choice in 'investing' in? Will AC diversify my holding in that suspended loan? No? Thought not. As to your answer to 2, It is BS that all GEIA investors equally share the exposure to suspended loans. I know of other investors in the GEIA that are not invested in the suspended loans I have. I am fed up with hearing about a provision fund which never pays out and a system that locks my money into bad loans with no means of exiting from them. All good points. I think AC would argue that they have addressed these concerns. They have done nothing of the sort. Your first issue could be addressed as follows: "The directors have discussed loan xxxxxxxxxx and decided, at their discretion, on a twelve month recovery process and lender compensation policy. If the security behind this loan remains unsold at that point in time, or the sale fails to cover capital and interest, the provision fund will pay all outstanding capital and interest to lenders."So simple. So absent.
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agent69
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Post by agent69 on Sept 23, 2017 9:10:28 GMT
Can I sell my holding in that suspended loan that I had no choice in 'investing' in? You give up the right to have a choice when you invest in the GBBA /GEIA. If you wanted to retain control you should have invested in the MLIA
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SteveT
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Post by SteveT on Sept 23, 2017 9:39:00 GMT
Can I sell my holding in that suspended loan that I had no choice in 'investing' in? You give up the right to have a choice when you invest in the GBBA /GEIA. If you wanted to retain control you should have invested in the MLIA If a loan has been suspended, MLIA holders cannot sell it either.
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agent69
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Post by agent69 on Sept 23, 2017 9:46:35 GMT
You give up the right to have a choice when you invest in the GBBA /GEIA. If you wanted to retain control you should have invested in the MLIA If a loan has been suspended, MLIA holders cannot sell it either. I was referring to control over what you invest in. I appreciate that once the sticky brown stuff hits the fan all investors are in the same boat
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ashtondav
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Post by ashtondav on Sept 23, 2017 11:27:23 GMT
You give up the right to have a choice when you invest in the GBBA /GEIA. If you wanted to retain control you should have invested in the MLIA If a loan has been suspended, MLIA holders cannot sell it either. In the accounts you concede the right of choice because there's a "discretionary" Provision Fund. And therein lies the rather large elephant in the room 
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happy
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Post by happy on Sept 23, 2017 18:23:47 GMT
All PFs are in fact discretionary in P2P otherwise they constitute an insurance product which totally changes the rules and legal governance that are then enforced on the 'product' so it no longer becomes pure P2P.
The fact that PFs operate differently in terms of when they are likely to pay out in a secured loan platform such as Lendy and AC (i.e.only when the security is realized and any shortfall is established) to unsecured loan platforms such as RateSetter or LendingWorks (where the PF actually takes over the loan 'asset' at the initial default and pays the lender immediately the outstanding loan balance as in the case of RateSetter) has nothing to do with AC management trying to make themselves look like an awkward bunch of arses, this is just how the law of the land forces them to operate their business, plain and simple.
I understand your are a little pissed about the situation you are in and do sympathise with you but unfortunately you did not invest in an easy-access cash product, you invested in P2P loans in a fund that clearly states it may invest up to 20% of your money in a single loan. You were unlucky to have loans default on you so soon but you will almost certainly get all your money back, of that I am pretty sure, but you unfortunately will have to wait until the assets are sold and the PF pays up if required to cover any shortfall.
Works the same on most other secured P2P sites that I know of where they have a PF so I don't think AC are doing anything wrong or outside normal practice for the industry here. JMHO...
Edit: on the other side of the argument, and I have posted on this many, many times before, AC really do need to get the diversification management of the GBBA/GEIA and PSIA accounts sorted out ASAP.....please!
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Post by peerlessperil on Sept 24, 2017 0:04:38 GMT
Funnily enough I've not been able to find in their Ts & Cs where AC commit to any specific level of diversification in the GBBA. All I've been able to find is: The GBBA will automatically diversify your account funds across many matching loans at any given time, with the aim of doing so in an equal and proportionate way and subject to loan availability. For example, if 50 suitable loans are available, the GBBA will aim to invest approximately 2% of account funds into each loan. Likewise, with only five suitable loans, the GBBA will aim to invest approximately a fifth (20%) of account funds into each loan.
The 20% number is preceded by "For example", so these are not definitive limits. This may well be because if you invest and then withdraw prior to your cash being fully invested you can end up with far more than 20% in a single loan. This matter has been raised with AC ( andrewholgate) some time back, and it is a pity that the misunderstanding around this product persists. |
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mikes1531
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Post by mikes1531 on Sept 24, 2017 3:04:03 GMT
... you invested in P2P loans in a fund that clearly states it may invest up to 20% of your money in a single loan. The 20% number is preceded by "For example", so these are not definitive limits. This may well be because if you invest and then withdraw prior to your cash being fully invested you can end up with far more than 20% in a single loan. This may be the way it is supposed to work but, unfortunately, it isn't the way it's actually working. As I have reported in another thread, I added to one of those accounts and it immediately invested so much into one loan that 30% of my account was in that single loan. That was about five months ago, and my account still has 30% of its value in that single loan. (I haven't made any withdrawals from that account, so the possible explanation by peerlessperil above doesn't apply in my case.) I don't know if AC have published any statistics on the average time taken to fully resolve defaulted loans, but I think a lot of people who haven't had a default yet would be surprised how long it takes. The problem often isn't the time needed to sell the primary security. It's the time after that when further recovery possibilities are pursued. I'm in a few loans where the receivers/administrators have done their job and submitted their final report, and AC have distributed the proceeds. But AC also have said that they're still pursuing the borrower though the chance of further recovery is quite small. The problem is that this is a rather open-ended pursuit, and AC don't seem to be willing to use their discretion over the PF to make any payouts until they give up that pursuit. This process can take years, and I really don't understand why the PF trustees can't take action as soon as the main recovery has been made, as any recoveries made after that could be used to replenish the PF. The long-term impact on the PF would be the same, and AC investors would feel a lot better about the PF. If AC can solve the rebalancing issue, a lot of the dissatisfaction with the current diversification problem and PF use will go away, so I do hope they're successful.
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ashtondav
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Post by ashtondav on Sept 24, 2017 7:07:22 GMT
Its best to consider AC as not having a PF, and simply use MLIA and or Quick Access. All other accounts are problematic, either in terms of diversification or default compensation. Ratesetter manages to get this right, quite why AC is unable to operate better is mysteriously down to their "legal advice".
Crazy situation for a potentially attractive platform to be in.
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m2btj
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Post by m2btj on Sept 24, 2017 7:39:55 GMT
Its best to consider AC as not having a PF, and simply use MLIA and or Quick Access. All other accounts are problematic, either in terms of diversification or default compensation. Ratesetter manages to get this right, quite why AC is unable to operate better is mysteriously down to their "legal advice". Crazy situation for a potentially attractive platform to be in. I see the AC provision fund as a marketing tool to bring gamblers to the table.
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Post by peerlessperil on Sept 24, 2017 7:54:19 GMT
It is important to note that the diversification rule applies across the entire GBBA account value, not just the invested proportion (otherwise the first allocation could never be made as 20% of zero doesn't get very far). So if you transfer an amount into the GBBA cash account it will potentially allocate 20% of that value to a single loan (often one sitting around in the SM that nobody wants with a month to go, but meets the criteria!). If you then withdraw any of the uninvested balance you tip that holding past 20%, and the algorithm will then seek to sell that holding back down to 20%, but you have to sit in the queue just as if you were selling the loan from your MLIA. If you have never moved any uninvested cash back out of the GBBA (as you suggest below) then you should be knocking on AC's door for a detailed explanation. They will look into it for you. The lack of any mechanism to diversify accounts further (to reduce your holding concentration further, regardless of cashflows in/out) is an acknowledged shortfall in the current product. I exited the GBBA promptly and do everything via the MLIA. This may be the way it is supposed to work but, unfortunately, it isn't the way it's actually working. As I have reported in another thread, I added to one of those accounts and it immediately invested so much into one loan that 30% of my account was in that single loan. That was about five months ago, and my account still has 30% of its value in that single loan. (I haven't made any withdrawals from that account, so the possible explanation by peerlessperil above doesn't apply in my case.) |
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ashtondav
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Post by ashtondav on Sept 24, 2017 8:08:12 GMT
A clearly unacceptable ploy.
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Post by peerlessperil on Sept 24, 2017 8:17:15 GMT
And I agree that discretionary provision funds are a waste of time ( ashtondav knows my opinions on ratesetter, which is no longer a p2p platform, rather a messy evolution into a pooled investment vehicle - their provision fund does have rules, but they can seize your interest at their sole discretion before the PF is depleted so back to square 1). The industry should be forced into one of two categories: - Proper pooled funds that socialise risk such that every investor experiences every loan default pro-rata
- Proper loan distribution platforms with no provision funds whatsoever
The first is difficult because you have to attribute a value to any defaulted loans, and that's quite subjective and difficult if you don't have a mechanism for transferring loans parts at values other than par. Alternatively you remove defaulted loans from the pool immediately and apply recoveries to the those who held units on the day (technically demanding, although little different to trading shares cum and ex-div). You effectively become a fund manager/bank, not a peer-to-peer matching service.
The latter is the obvious way to go, and credit to the FCA, they realise this.
Clearly that doesn't suit the marketing agenda of the platforms who know less sophisticated investors love the warm fuzzy feeling of an illusory safety net. |
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Post by oldnick on Sept 24, 2017 10:48:16 GMT
A clearly unacceptable ploy. Mod hat off, Lender and minor shareholder's hat on. Hmm. I think we're all gambling that our returns will exceed our losses. It could as easily be said that high interest rates bring gamblers to the table - and that the 'lure' of a provision fund brings more cautious investors to the table. Whilst I agree with the general opinion that these funds are not functioning as well as they could, they should not be seen as bank deposit accounts with the certainty of full withdrawal over any time period. All you experienced p2p investors already know this - and the inexperienced should take care to understand what the worst case scenario is with this type of investment before putting in money that they can't afford to lose. The GEIA and GBBA should be seen as 'decision free' rather than 'risk reduced' investments. Skillful investors may well achieve higher returns in the MLIA, but at the cost of their time. Unless sufficiently large investments are being made, or the time spent on due diligence is not priced, the lower returns of the GEIA and GBBA are reasonable. Once again, I'm not defending the way these accounts are working at the moment, and AC have acknowledged the deficiencies and promised improvements.
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