pikestaff
Member of DD Central
Posts: 2,187 
Likes: 1,546
|
Post by pikestaff on Sept 24, 2017 12:48:17 GMT
...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... Not so. There is no legal reason why the PF should not pay out as soon as payment is missed (the RS model), or after an interval, with any amounts subsequently realised being paid into the PF. The main reason AC don't do this is as per Stuart's post earlier in this thread - it would be too expensive. AC's (and Lendy's) books are heavily dominated by property lending. Even in the ordinary course of events there will be defaults, although most should not result in losses. To pay out on property loans before losses crystallise would require a prohibitively large PF. But I think cases such as the plumber, where any significant further recovery is remote, well illustrate when discretion should be exercised to pay before the final outcome is known for sure. I see no reason why this should not be affordable. I should add that I avoid PF backed accounts for property lending. Partly because the PFs are slow to pay out, but also because they may not be robust in a downturn. When the next property crash happens there will be a lot of defaults all at once, and a significant proportion may result in losses. I'm not convinced that the PFs will be big enough, particularly on the racier platforms.
|
|
|
|
Post by peerlessperil on Sept 24, 2017 13:43:27 GMT
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. I think oldnick is right here, although in a situation where the DPF is depleted you could see some very severe losses by GBBA investors once the safety net is breached as the diversification is insufficient. My rationale for exiting the GBBA and using the MLIA was not to achieve higher returns, it was to gain much greater diversification. I now hold 167 loans in the MLIA. I do, however, take the time to read the credit reports and I do frequently duck loans. I think there may be a half-way house for the time-poor. Just buy a 1% chunk of every loan that comes up in the MLIA without doing any DD. It may take 6-12 months to get fully invested, but your uninvested cash will be swept into the QAA so the cash drag is bearable. Institutional corporate bond funds will hold often 100-150 bonds to combat the asymmetry of bond returns, and that's in investment grade, so follow their lead and spread your money as widely as you can.
|
|
ashtondav
Member of DD Central
Posts: 1,814
Likes: 1,092
|
Post by ashtondav on Sept 24, 2017 14:29:52 GMT
Not comparing with bank account. Comparing with Ratesetter where a functioning PF eliminates the need for diversification. And yes it's good the issues are being addressed. AFAIAC Quick Access and MLIA both function as they should.
|
|
IFISAcava
Member of DD Central
Posts: 3,692
Likes: 3,018
|
Post by IFISAcava on Sept 24, 2017 14:58:50 GMT
It's also the control - being able to sell out of loans, go heavy or light - that the MLIA retains. I had decided to use the MLIA for 8% and over loans only and leave anything less to the GBBA, but since the 7-7.5% loans will actually not be in the GBBA as returns are too low to fund the PF (if I have understood correctly), have decided to include them too in a diversified portfolio and sell out of GBBA for the time being. It means a bit of a lower MLIA rate (which in any case is reducing as the older loans mature) but more control.
Having said that, am staying in GEIA, partly because of the fuzzy warm feeling, partly as I think the risk is a bit higher on these and PF may be more useful (if delayed in operation).
|
|
mikes1531
Member of DD Central
Posts: 6,453
Likes: 2,320
|
Post by mikes1531 on Sept 24, 2017 19:51:06 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. : Perhaps I didn't make myself clear with my earlier post, and you haven't looked at my saga as reported in the 'GBBA, GEIA account question' thread. In short, I had £X in my GEIA. I added £0.43X to it. Within minutes, the account put the whole £0.43X into a single loan. So 0.43/1.43 (30%) of my account was in a single loan. That was in April. I've not added anything further to the account, nor made any withdrawals. As a result of interest received, the account is now worth £1.48X. It still has £0.43X in that one loan, so that loan now represents 'only' 0.43/1.48 (29%) of my account. I did raise a query with AC Support. I received a number of 'holding' emails over the next two months saying AC were looking into the situation and would contact me with an update within about a month. (The excuse for the lack of an answer after two months was "due to the complexity involved".) The last one of those came in June. I didn't hear anything in July or August, so I poked them again this month. The 'final' response I got quoted the same paragraph you quoted in italics in your message of earlier today. It then went on to say... So the 20% limit we were told about when the accounts were introduced definitely no longer applies. And as for "the actual extent of the automatic diversification may be limited unless/until new loans become available"... Well, that may be the hope but it doesn't actually work like that. Once an account becomes poorly diversified, it stays that way even if new loans become available. AC management know that -- stuartassetzcapital admitted that in this thread when he told us that improvements are in the pipeline -- but AC still are allowing their support team to give investors the impression that the diversification system does work. My experiments with the GEIA/GBBA haven't been what I considered to be a success, so my investments in those never went beyond the 'test' phase. 99+% of my AC investment is in the MLIA, and I think it's going to stay that way for a long while.
|
|
|
|
Post by peerlessperil on Sept 24, 2017 22:32:29 GMT
mikes1531 I don't doubt your account. As you will note in an earlier post in this thread, I've not managed to find anything that commits AC to the 20% max holding on their website - just the text under the diversification heading saying "for example", which leaves me unconvinced. In my case I ended up with a 30% holding, but I did withdraw uninvested cash for redeployment elsewhere and the algorithm didn't allocate me more than 20% at the time so I had no personal cause for complaint (other than my own stupidity in assuming the product was more sophisticated than it is). If you feel strongly about this matter then raise a formal complaint with AC (make sure you use the word "complaint" so it can't be categorised as a "query") - make it for the attention of their compliance officer. Point out that you were allocated >20% and say you believe this breaches the terms of the product as you understood them. As an FCA authorised firm they will have to follow due procedure and are obliged to respond within 8 weeks. In the meantime, if you don't like it, sell out like many others have and stick with the MLIA.
|
|
registerme
Member of DD Central
Posts: 6,624
Likes: 6,437
|
Post by registerme on Sept 30, 2017 7:31:11 GMT
chris the other thing I've just noticed is that the GBBA will buy without reference to your MLIA account, so you may end up with considerably more exposure to any one loan than you were expecting. Personally I think the current approach to diversification used by the GBBA is so unfit for purpose that, should a GBBA held loan default, I think AC would be hard pressed not to compensate people for outsize positions they have. Quite apart from anything else it would be reputationally ruinous.
|
|
angrysaveruk
Member of DD Central
Say No To T.D.S
Posts: 1,332
Likes: 789
|
Post by angrysaveruk on Sept 30, 2017 10:13:24 GMT
The only way to invest in Assetz Capital are the 30 day Access Accounts (which I cant see them not paying out on unless it really hits the fan) or Manual Investment. The automatic investment accounts are likely to end up giving you large chunks of loans that you probably dont want - and you will pay a premium for the "provision fund" which no one seems to know  it is exactly. |
|
IFISAcava
Member of DD Central
Posts: 3,692
Likes: 3,018
|
Post by IFISAcava on Sept 30, 2017 10:55:32 GMT
The only way to invest in Assetz Capital are the 30 day Access Accounts (which I cant see them not paying out on unless it really hits the fan) or Manual Investment. The automatic investment accounts are likely to end up giving you large chunks of loans that you probably dont want - and you will pay a premium for the "provision fund" which no one seems to know it is exactly. Or the QAA for funds you don't want to tie up for 30 days.
|
|
jonah
Member of DD Central
Posts: 2,031
Likes: 1,113
|
Post by jonah on Oct 1, 2017 7:28:07 GMT
There is a stuartassetzcapital post in general board suggesting more clarity on PF approach soon and improved GBBA GIEA diversification in Q4. Both sound positive to me. |
|
|
|
Post by stuartassetzcapital on Oct 1, 2017 10:13:30 GMT
This is correct. It’s overdue on both counts so apologies and they have now been able to be prioritised in what we hope is a Q4 release for the diversification enhancement and asap for the PF policy clarification.
|
|
|
|
Post by valueinvestor123 on Oct 1, 2017 13:09:35 GMT
Hi everyone. We will be reverting on this PF point in more detail shortly. In the meantime, it is important to understand that the PF is not an insurance policy, in the truest sense, as that would require a different set of permissions from the FCA. Payments from the PF are discretionary so as not to be implicitly an insurance policy. It is the intention to pay out on all losses, except where lenders have voted specifically to accept a loss – this is noted on the relevant web pages. Each of Assetz Capital’s PF’s is intended to be funded to a level that should be more than sufficient to cover any actual capital losses on defaulted loans within the relevant account. The actual capital loss, once all avenues of recovery have been exhausted, should not be the full loan amount as it should be possible to recover some or all of our lenders’ capital through the security pledged in support of the loan. Our PF’s are not designed to cover the whole loan capital on all defaulted loans as this would require considerable levels of capital in order to fulfil this. We estimate that roughly 6% of loans will default so for every £100m of lending we would need £6m of PF cash to be able to fulfil a requirement to purchase full loans immediately at the point of default. We do not – and could not – promise to do this. Instead, we know that not every default will result in a loss and we make considered calculations as to what the expected losses on defaulting loans will be and hold an acceptable level of cash to be able to cover expected losses at the end of the recovery process. Our PF web page says – and has always said – that the PF will cover “Any possible capital losses if a loan defaults and the security when sold does not cover the loan balance remaining” which defines both what the PF will cover and when it will cover it. So to summarise, the PF would not be able to 'buy' whole loans from investors at the point of default but we do expect it to cover the final capital loss, if any, once it is known and the recovery process is finished. Our Defaults and Losses page shows the coverage ratio for each PF which is high for the industry but I accept that the page is due a refresh and this is underway. It also shouldn't be forgotten that I understand that investors can submit losses in their tax return when they judge it is time to do so. It isn't purely down to our notification of final recovery. It can always be corrected afterwards. We are close to issuing our new tax statement which will help you make these decision. I hope this assists. "We estimate that roughly 6% of loans will default so for every £100m of lending we would need £6m of PF cash to be able to fulfil a requirement to purchase full loans immediately at the point of default" It would be of great interest to know what this estimation is based on. I think I was told before that this information is "privileged" or something similar. The trouble is- and nobody in the industry seems to ackowledge it- unprecedented and unexpected events take place more often than historic data would suggest. And there isn't that much history for those types of loans. Default levels could rise drastically and completely unexpectedly. It's not a question of if, but of when. I don't mean to project doom (in fact I don't think a PF is necessary at all: it's better to just accept losses as they come and pass this saving on via a higher interest rate so investors could self-insure themselves). What I worry about more, is how all the accounts and loans are held together and being made dependant on each other (also via the PF) masking some of the real risks, and that the accounts appear convenient and safer while the platform can justify offering lower rates/(much higher spreads over interest charged to borrowers and passed onto lender) than the true risk would imply. It's a bit like putting lipstick on a pig. Having said that, I appreciate that the platform is trying and at least some of the team members appear to be listening and taking note of the comments. This is a good start.
|
|
mikes1531
Member of DD Central
Posts: 6,453
Likes: 2,320
|
Post by mikes1531 on Oct 1, 2017 19:54:33 GMT
We estimate that roughly 6% of loans will default so for every £100m of lending we would need £6m of PF cash to be able to fulfil a requirement to purchase full loans immediately at the point of default. We do not – and could not – promise to do this. : Thanks for your input. With respect to the statement quoted above... This would be true only if all the £6M of defaults happened at once, or if they took so long to resolve that none had been resolved by the time the last default occurred. If the defaults are spread over the lives of the loans, and don't take years to resolve, then there wouldn't be £6M of defaults at any given time, and the actual cash required to purchase loans as they are declared to be defaults wouldn't be as large as £6M. As the platform's portfolio is quite diversified, AC should expect defaults to be spread throughout time and a bit of experience should allow them to forecast the 'flow' of defaults and build their PFs accordingly. There'd obviously be a problem if one of AC's multi-million pound loans were to be declared a default. I expect investors would accept that in that case AC couldn't take the whole loan back immediately and put it on the PFs' books. So I don't think investors would expect AC to promise to do that. But it isn't beyond the realm of possibility for AC to set out a 'plan' for PF use that would indicate which loans it might buy back promptly and which are too large to swallow before resolution. Having said that, though, we haven't a clue what portion of AC's huge loans are held in accounts covered by the PFs and what portion are held in MLIAs and therefore not covered by the PFs, so perhaps even one of those defaulting wouldn't cause problems for the PFs. I look forward to reading AC's upcoming PF policy clarification.
|
|
it is exactly.
