ashtondav
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Post by ashtondav on Nov 14, 2017 8:39:57 GMT
I chanced upon 4th way recently and was surprised to see it give AC a risk rating of 5/10, where 10 is high risk and 1 is a saving account. This is the same risk score as they give to Zopa - a platform that makes unsecured loans with no PF. I can't see any obvious reason for the score. Any more experienced users of 4th way with a view on their risk scoring?
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oldgrumpy
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Post by oldgrumpy on Nov 14, 2017 8:42:15 GMT
Has 4th way caught up with Zopa's abandonment of the "safeguard" yet?
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ashtondav
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Post by ashtondav on Nov 14, 2017 9:02:35 GMT
Don't know but the score was given to Zopa +, which never had SG.
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trouble
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Post by trouble on Nov 14, 2017 9:38:06 GMT
Been following 4th Way since inception, like any piece of 'info' on FinTech it was started by someone, then other people added to it.
For the record I have always liked it, it's the only site out there doing what it is doing, but it is their opinion on something, not mine or yours, so use 4th way in conjunction with this forum and whatever other research you read to make your own objective judgement of any P2P site and it's various loan deals.
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Post by chris on Nov 14, 2017 10:43:10 GMT
There's another independent source of data that has had access to our entire loan book and loan history: AltFiThey have a standardised definition of defaulted loans and how the value of those is written off that they have applied to all the platforms equally. Certainly not perfect, the 1 year data for example shows our figure inflated by strong recoveries on loans that had previously been defaulted and written down by their model, but comparing the three year figures should (in their view) give an idea of the relative returns available on each platform after bad debt, defaulted loans, and recoveries are taken into account on an aged loan book. |
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ilmoro
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'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Nov 14, 2017 21:43:46 GMT
Never been impressed by 4thway. Dislike their definitions of low risk platforms and find a lot of their articles not fully researched and out of date. I raised an number of inaccuracies in one of their major pieces and TMK it was never corrected.
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Post by peerlessperil on Nov 15, 2017 1:33:06 GMT
I've had a look through the 4th Way site and the methodology they employ for their ratings. It is important to note that they focus on the loan books, rather than the platforms. Whilst they are trying to do the right thing, there are issues with applying methodologies developed for more mature sectors (e.g. stress testing of bank loan books using Basel approach) to an industry as immature as p2p. The data requirements for this sort of modelling means that only the more established platforms have the necessary track record, and they all end up with very similar ratings. They don't really address the issue of platform failure, which I believe to be the primary risk at present. This is much harder to model in any quantitative sense and relies on the vital stuff that is hard to describe with a number: - Management competence, experience and honesty
- Platform profitability and funding sources
- Risk of fraud (both platform operators and borrowers)
- Reputational risk as defaults mount
- The loss of confidence that arises when secondary markets are over-supplied
- The ripple effect of another platform failing
- Cross-platform correlations due to introducer/borrower overlap
- Optimistic (or inappropriately instructed) valuations
It is all well & good to model a 55% fall in property prices, but if the valuations are inflated to start with it becomes a case of garbage in, garbage out. We are already seeing defaults on some platforms where lenders will be happy to achieve a 55% recovery - and that is before any recession!
As we saw with their glowing review of Growth Street, whether a platform has a business model that actually works in practice (or simply annoys its lenders with misleading time-to-invest stats, then forces them to rejoin a queue every time they move the rate down) is a secondary matter.
Nevertheless, the more the better when it comes to people kicking the p2p loan books.
Question is - if you are funded by introductory commissions are you ever going to tell people to get out of the sector entirely or avoid investing in p2p? |
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bugs4me
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Post by bugs4me on Nov 15, 2017 11:02:08 GMT
I've had a look through the 4th Way site and the methodology they employ for their ratings. It is important to note that they focus on the loan books, rather than the platforms. <snip> Agree fully with this post and in addition to the necessity, or so I believe, in carrying out meaningful DD on loans being presented, I always carry out DD on the platform itself prior to even considering investing. It's relatively easy to set up a P2P platform, apply to join the FCA who in my experience are often as useful as a chocolate teapot and away you go with some minimal PI insurance. Some of the DD I've carried out on the platforms, throws up a huge question mark in my head. I wouldn't even ask a couple of them to look after my sandwich at lunch time let alone trust them to responsibly loan out my funds. Fortunately they are in a minority and it appears after promising the earth, moon and stars seem to just gradually drift away. Nonetheless, if the P2P sector is going to gain the on-going trust of lender's, it does need in many cases to mature responsibly - in others words, grow up. Sadly I cannot see this happening whilst many of them can fund just about everything on offer. Nonetheless I cannot see newer lenders continuing to make up the shortfall of those that have decided enough is enough.
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Post by GSV3MIaC on Nov 16, 2017 15:48:17 GMT
You don't subscribe to the PT Barnum view then? ('One born every minute').
I do have a problem with 'P2P' where the decision making is all with the platform and no loan ever fails to get funding from the Ps on the sharp end (because the platform makes the decision). I call that 'banking', or something scarily close to it.
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trouble
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Post by trouble on Nov 16, 2017 17:44:14 GMT
The issue will be if the black box account QAA thingy starts to get stuck with loans that won't sell down to MLIA investors for one reason (too large, too lowly priced, defaulted, paused etc) or another leading to ever decreasing liquidity. The QAA has effectively turned AC into a principal lender (without the capital risk) with the sell down to MLIA being the equivalent of a securitisation of the QAA to release liquidity - genius  |
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zlb
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Post by zlb on Nov 22, 2017 19:24:46 GMT
I've had a look through the 4th Way site and the methodology they employ for their ratings. It is important to note that they focus on the loan books, rather than the platforms. <snip> Agree fully with this post and in addition to the necessity, or so I believe, in carrying out meaningful DD on loans being presented, I always carry out DD on the platform itself prior to even considering investing. It's relatively easy to set up a P2P platform, apply to join the FCA who in my experience are often as useful as a chocolate teapot and away you go with some minimal PI insurance. Some of the DD I've carried out on the platforms, throws up a huge question mark in my head. I wouldn't even ask a couple of them to look after my sandwich at lunch time let alone trust them to responsibly loan out my funds. Fortunately they are in a minority and it appears after promising the earth, moon and stars seem to just gradually drift away. Nonetheless, if the P2P sector is going to gain the on-going trust of lender's, it does need in many cases to mature responsibly - in others words, grow up. Sadly I cannot see this happening whilst many of them can fund just about everything on offer. Nonetheless I cannot see newer lenders continuing to make up the shortfall of those that have decided enough is enough. You've confirmed a worry that I had about the FCA accreditation - lots of startups launched with an ISA without any track record. It seemed a bit emperor's new clothes (to me); whilst I'd agree that there needs to be moderation and an accreditation structure. I asked 4thWay about their recent statement about platform fees being non-deductable and had no reply from 4thway - they used to reply to my questions in the past. There are so many variables that it can feel as if no amount of DD with prevent losses. e.g. does one interpret Z's lack of a provision fund a mark of their confidence in their model - the question being have they 'spoken' too soon?
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