ashtondav
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Post by ashtondav on Oct 23, 2017 7:38:36 GMT
I meant partially covered on RS because if defaults go above 3.5% (when I looked last week) interest is deducted equally from all lenders, so diversification is not an issue. I firmly believe that come the next recession defaults will be higher than 3.5% and so budget for 1% or 2% haircut from my 6%. If I can't achieve 6% I lend on FC as SME lending is less fickle than consumer lending. Inactive money I keep in AC QAA, ready for deployment.
Obviously there would be a bigger haircut on Zopa where some on this forum are actually losing capital in Zopa +, in a benign economic environment with virtually full employment. That is CRAZY! I just cannot trust Zopa anymore and will withdraw repayments until I review their business model and lending results sometime next year.
The FT ran an article on Zopa recently with the heading: "higher risk, same reward", that sums it up neatly for me.
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aju
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Post by aju on Oct 23, 2017 9:20:13 GMT
yeah I did read that and became more disillusioned - I have tried to stick with a balanced lending approach across Plus and Classic in old Invest and Plus and core in ISA. I've got 5 defaults in Plus on the old side but its a bit too early in ISA side some look a little shaky but they are hopefully just teething issues.
I'm not sure that Zopa has not lost its way a little with its DD on the borrowing side and I'm not happy with the AI techniques they are using - ex developer that I am - but again I guess time will tell. I've taken a simple approach with the way I view my zopa investments. I'm unsure of Plus still so I keep my lending (10%) measured relative to Classic. I've lent in ISA Plus in slightly higher proportion (15-20%) but tried to keep the diversification as high as possible. I haven't fully analysed it but seeing my SG covered defaults in Classic leads me to think that Zopa's fix of reducing the D&E mix in Plus will not stop the defaults rate in Core if recent Classic is anything to go by.
I treat my investments more as a whole entity. I'm still in profit with Plus and across my "Invest" side I am in healthy profit and the ISA returns are building. I tend not to look at things from a monthly level more from a 12 monthly level. Its been easier in Invest as most things are running by themselves and no investing is happening I can see the returns easier. In ISA I have a rolling year return (Last 12 months) but it can be a bit skewed by the amount of investing that is still rolling on (I'm down to my last £200 of new money still to be lent out.).
Overall I'm quite a bit up, around the 5% mark, thankfully I'm not needing to take any funds from this so relend is permanently on for the moment. The early adopter bonus helps as well. I would add that mrs Aju is similar.
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Post by point5clue on Oct 24, 2017 18:58:40 GMT
Very approximately my lending is showing its rate is 10pc with expected real return of 5pc (rounded up or down for simplicity).
For a given sum invested is it as simple as expecting £100 pounds interest in a month, but suffering approx 5x£10 defaults turning 10pc into 5pc ?
I have a faint inkling that those defaults will affect future repayments, but can't figure it out.
In reality I'm seeing more like 30pc of my interest canceled by defaults, but I'm only six months in to Plus so its probably too early to tell.
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aju
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Post by aju on Oct 25, 2017 7:58:36 GMT
Although I haven't analysed in detail it seems to me that the defaults I see in classic may be bigger indicator than I had thought. I've been lending quite a lot recently on the ISA side and it will take some time to filter through. It seems to me that Zola have perhaps stretched their model too far. I am getting repayments on many of my defaults from pre-sg days but all are real slow.
The interesting thing of classic failures is that they are across the piece not just d or e.
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trium
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Post by trium on Oct 26, 2017 2:58:22 GMT
In reality I'm seeing more like 30pc of my interest cancelled by defaults, but I'm only six months in to Plus so its probably too early to tell. This seems, taken along with information in other threads, typical. I started Plus in February and have seen 29.4% of earnings disappear including a single A1 borrower taking 66% of the interest returned so far by other A1 borrowers (other markets:- B 25%, C1 67%, D 10%, E 43%). Worryingly I have Collections/Arrangements threatening another 55% and about the same in lates that are still posted as simply "Withdrawn". This is not what I was expecting so early on! A couple of things concern me. Firstly, I noticed rates dropping rapidly in June and assumed it was the ISA launch flooding the place with money. Only 2 months later did we learn that Zopa had reduced D and E exposure following adverse indications on loan performance. A more timely announcement might have discouraged me from adding 3K in on the expectation of net returns >6%. Secondly, the dilution of D/E to only 10-15% (some lenders apparently diluting further by mixing in Core) means that a £1k topup, which it is claimed is a sensible level for diversity, will only produce 10-15 loans across D/E. I doubt one can claim that this is a large enough sample to expect anything approaching average fortunes and investors are not being warned. Personally I would prefer a Plus product containing ONLY D/E so I can blend the two products in the proportions that suit me without duplicating exposure to derisory rates of A* but that's another whinge. I don't see Core offering much shelter since I would have incurred the worst bad debts (in C1) anyway.I'm expecting defaults to worsen before they get better and I am holding off new money for now.
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ashtondav
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Post by ashtondav on Oct 26, 2017 7:24:06 GMT
Yes, there are too few D and E loans being allocated to achieve "average returns", for the small (£1,000 to £20,000?) lender. Zopa has become very high risk unless you are a VERY large lender.
zopa need to address this issue but have been ominously silent, relying probably on the fact that this forum contains the knowledgeable few and that the rest of their punters can't calculate annual returns. It will be interesting to see the reactions to the 2017/2018 tax statement next May!!
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