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Post by gravitykillz on Apr 4, 2019 16:12:34 GMT
Things are obviously bad hence rs are 'limiting' the release of their official data. And even manipulating information to make lenders feel comfortable lending during this important tax period.
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wapping35
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Post by wapping35 on Apr 4, 2019 16:23:13 GMT
A concern I have is the variance from the old target range. I quote from the RateSetter post above. "For context, since the target Interest Coverage Ratio was introduced in 2016, the Interest Coverage Ratio has fluctuated between 110% and 131% and at all times investors have been earning the returns that they expected." The old range had a mid point of 137.5% and the variance from that within the last 3 years was minus 6.5% to minus 27.5%. It has never been positive ! Well as we now have a target of just 125% that same range (without a recession) would have led a PF fund event. i.e. 125% -27.5% = 97.5% and then of course an interest rate haircut would apply. W35
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Post by propman on Apr 4, 2019 16:45:42 GMT
A concern I have is the variance from the old target range. I quote from the RateSetter post above. "For context, since the target Interest Coverage Ratio was introduced in 2016, the Interest Coverage Ratio has fluctuated between 110% and 131% and at all times investors have been earning the returns that they expected." The old range had a mid point of 137.5% and the variance from that within the last 3 years was minus 6.5% to minus 27.5%. It has never been positive ! Well as we now have a target of just 125% that same range (without a recession) would have led a PF fund event. i.e. 125% -27.5% = 97.5% and then of course an interest rate haircut would apply. W35 I take your point, but clearly the range was only ever considered a mid-term objective. They will have had the approach of a PF Fund event much more seriously as they did in the past when lending to the PF and buying major defaulting borrowers / arrangers, so I don't think the comparrison is that appropriate. Personally I have always believed that a PF Event is inevitable one day and likely in any significant recession. I would like to know how they would operate in this scenario. The most straight forward approaches are likely to see a collapse of the business. In the early days tey admitted that it would be the end of RS, but that was when the cash fund was 170%+ of expected defaults!
In addition, a key lever they have used to escape issues is the sale of defaulted loans. But we have not received any info on this and so cannot estimate the defaulted loans currently held by the PF and hence the possible funding available from this route.
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Post by Ace on Apr 4, 2019 17:27:11 GMT
A concern I have is the variance from the old target range. I quote from the RateSetter post above. "For context, since the target Interest Coverage Ratio was introduced in 2016, the Interest Coverage Ratio has fluctuated between 110% and 131% and at all times investors have been earning the returns that they expected." The old range had a mid point of 137.5% and the variance from that within the last 3 years was minus 6.5% to minus 27.5%. It has never been positive ! Well as we now have a target of just 125% that same range (without a recession) would have led a PF fund event. i.e. 125% -27.5% = 97.5% and then of course an interest rate haircut would apply. W35 I take your point, but clearly the range was only ever considered a mid-term objective. They will have had the approach of a PF Fund event much more seriously as they did in the past when lending to the PF and buying major defaulting borrowers / arrangers, so I don't think the comparrison is that appropriate. Personally I have always believed that a PF Event is inevitable one day and likely in any significant recession. I would like to know how they would operate in this scenario. The most straight forward approaches are likely to see a collapse of the business. In the early days tey admitted that it would be the end of RS, but that was when the cash fund was 170%+ of expected defaults!
In addition, a key lever they have used to escape issues is the sale of defaulted loans. But we have not received any info on this and so cannot estimate the defaulted loans currently held by the PF and hence the possible funding available from this route.
I think that RS would do everything in their power not to have to declare a ratio anywhere near 100%. IMO a ratio below 100% (or even close to it) would cause a run on RS that would be difficult for them to survive. All bar the quickest to react would be stuck in RS waiting for repayments and recoveries. I should declare that I'm already withdrawing from RS, mostly because I don't like their modus operandi. I'm not concerned enough about their latest obfuscations and ratios to warrant paying the exit fees. So definitely not suggesting that there is any need to panic yet. I'm happier to lend on what are generally considered (though not necessarily by me) higher risk platforms, particularly where they have a well functioning variable SM. They provide the ability to exit, albeit at a price, in times of trouble/need, as others will see a discount as an opportunity for a higher gain to be worth the risk. Just airing a alternative point of view. As always, don't risk what you can't afford to lose on non FSCS protected investments.
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ashtondav
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Post by ashtondav on Apr 5, 2019 9:34:42 GMT
I take your point, but clearly the range was only ever considered a mid-term objective. They will have had the approach of a PF Fund event much more seriously as they did in the past when lending to the PF and buying major defaulting borrowers / arrangers, so I don't think the comparrison is that appropriate. Personally I have always believed that a PF Event is inevitable one day and likely in any significant recession. I would like to know how they would operate in this scenario. The most straight forward approaches are likely to see a collapse of the business. In the early days tey admitted that it would be the end of RS, but that was when the cash fund was 170%+ of expected defaults!
In addition, a key lever they have used to escape issues is the sale of defaulted loans. But we have not received any info on this and so cannot estimate the defaulted loans currently held by the PF and hence the possible funding available from this route.
I think that RS would do everything in their power not to have to declare a ratio anywhere near 100%. IMO a ratio below 100% (or even close to it) would cause a run on RS that would be difficult for them to survive. All bar the quickest to react would be stuck in RS waiting for repayments and recoveries. I should declare that I'm already withdrawing from RS, mostly because I don't like their modus operandi. I'm not concerned enough about their latest obfuscations and ratios to warrant paying the exit fees. So definitely not suggesting that there is any need to panic yet. I'm happier to lend on what are generally considered (though not necessarily by me) higher risk platforms, particularly where they have a well functioning variable SM. They provide the ability to exit, albeit at a price, in times of trouble/need, as others will see a discount as an opportunity for a higher gain to be worth the risk. Just airing a alternative point of view. As always, don't risk what you can't afford to lose on non FSCS protected investments. Ace, are you instead favouring the platforms in your signature. Asking because RS seems to me to be a more stable platform than many of them.
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Post by imperial on Apr 5, 2019 10:23:46 GMT
The PF going below 100% really isn't a doomsday scenario - Zopa and Funding Circle lenders have repeatedly taken "haircuts" and they are doing fine. See here : www.altfi.com/article/3390_p2p_platform_zopa_expects_higher_loss_rates_lowers_return_projectionsZopa bad debt was greater than expected so the returns lenders are going to get now are less than Zopa originally forecast, aka a haircut. The PF going below 100% is just the exact same thing in a different format - bad debts are greater than expected so you are going to get a lower return. Even if this happens it will not necessarily be a big problem - it will depend on what is happening to other asset classes at the same time, i.e. it is RS performance relative to others that matters, not its performance relative to its own past. The real problem for RS is that a PF below 100% will invalidate a lot of their brand proposition. The good thing about the PF is that RS can take more contributions from new borrowers to bail out old lenders if it wants (and has to some degree already happened in its history), something that Zopa and FC can't do.
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Post by RateSetter on Apr 5, 2019 12:37:07 GMT
Dear RateSetter Can you please confirm when we will be told the PF Coverage Ratio (updated number). The last update given was from March 1, 2019 (118%), you indicated we would have monthly updates and thus the number as at April 1, 2019 is now due. The March statement only provided the March 1, 2019 number even though the February statement provided the number for March 4th 2019 (119%). Or are you saying we need to wait until May 1, 2019 for this since you will not be providing an April 1, 2019 number since this month the Q1 2019 update is also due ? Having some clarity as to what RS is planning to communicate would help and would reassure investors as opposed to allowing parties to speculate as to the reasons for the delay. Bare in mind you did explicitly state on March 22nd 2019 that RS was committed to the 125-150% range and then of course you made a total change of course and reverted to 125%, with no explanation as why things changed in only 9 days. May be at that time you were not aware of what the RS management team (Board) was considering... Many thanks Dear wapping35 Thank you for you questions. We announced on 21 March that our website data, including the Provision Fund Coverage Ratios, will be updated in the last week of each month. This change was made to improve data accuracy. As regards the Interest Coverage Ratio target, our post of 22 March was correct at the time of posting. RateSetter continually assesses the optimal way to deliver positive outcomes and we are committed to always communicating clearly any changes that may affect you as an investor. Thank you.
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Post by Ace on Apr 5, 2019 12:57:48 GMT
I think that RS would do everything in their power not to have to declare a ratio anywhere near 100%. IMO a ratio below 100% (or even close to it) would cause a run on RS that would be difficult for them to survive. All bar the quickest to react would be stuck in RS waiting for repayments and recoveries. I should declare that I'm already withdrawing from RS, mostly because I don't like their modus operandi. I'm not concerned enough about their latest obfuscations and ratios to warrant paying the exit fees. So definitely not suggesting that there is any need to panic yet. I'm happier to lend on what are generally considered (though not necessarily by me) higher risk platforms, particularly where they have a well functioning variable SM. They provide the ability to exit, albeit at a price, in times of trouble/need, as others will see a discount as an opportunity for a higher gain to be worth the risk. Just airing a alternative point of view. As always, don't risk what you can't afford to lose on non FSCS protected investments. Ace, are you instead favouring the platforms in your signature. Asking because RS seems to me to be a more stable platform than many of them. The short answer is: not necessarily. I invested in the equity of the platforms in my signature because I thought that their offerings stood a good chance of success at the time I invested. I only invested minor speculative sums in most of them. Only ABLrate tempted me enough to invest 4 figures. I've never invested on the Orca platform as I'm already directly invested in most of their underlying investments, but I do think that they are a good choice for those that don't like to tinker with the underlying investments as much as I do. I was intending to invest in AE, as I like their concept and had come to trust the Assetz brand. I've now decided to give them a miss in the near future (and probably longer) as I'm unimpressed with their ability to sort out problems with their website and T&Cs. I do invest with the others in my signature, but much less than half of my P2P pot is with them. In my opinion, RS is less safe than many believe for the reasons I stated, but they're probably not alone in this. I'm also not keen on the shenanigans required to achieve the best rates, though this could be my petulance at my failure to achieve my expected XIRR (I suffered to too much cash drag trying to chase the higher rates).
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Post by Ace on Apr 5, 2019 13:35:59 GMT
The PF going below 100% really isn't a doomsday scenario - Zopa and Funding Circle lenders have repeatedly taken "haircuts" and they are doing fine. See here : www.altfi.com/article/3390_p2p_platform_zopa_expects_higher_loss_rates_lowers_return_projectionsZopa bad debt was greater than expected so the returns lenders are going to get now are less than Zopa originally forecast, aka a haircut. The PF going below 100% is just the exact same thing in a different format - bad debts are greater than expected so you are going to get a lower return. Even if this happens it will not necessarily be a big problem - it will depend on what is happening to other asset classes at the same time, i.e. it is RS performance relative to others that matters, not its performance relative to its own past. The real problem for RS is that a PF below 100% will invalidate a lot of their brand proposition. The good thing about the PF is that RS can take more contributions from new borrowers to bail out old lenders if it wants (and has to some degree already happened in its history), something that Zopa and FC can't do. I take your points, but I think there is a major difference between a Zopa haircut and an RS haircut. Zopa don't promise a particular rate of return; they just state an average target. So it's not really a haircut, just a lower average target going forwards. When RS PF drops below 100% they will have to tell investors that they are not going to get the rates that they thought they had secured; a proper haircut. I fear that this will be the end of liquidity in RS as it would cause a run. Many investors will decide to "get out" ahead of this when the PF starts getting close to 100%, so the run could start much earlier. I really hope I'm wrong, it wouldn't be the first time by a very long way. Even if this does happen it wouldn't necessarily lead to a loss of capital, but it would probably tie the capital up for the full term of the loans, and possibly longer for the recoveries. I certainly don't buy RS's "This change was made to improve data accuracy".
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Post by propman on Apr 5, 2019 14:03:22 GMT
The PF going below 100% really isn't a doomsday scenario - Zopa and Funding Circle lenders have repeatedly taken "haircuts" and they are doing fine. See here : www.altfi.com/article/3390_p2p_platform_zopa_expects_higher_loss_rates_lowers_return_projectionsZopa bad debt was greater than expected so the returns lenders are going to get now are less than Zopa originally forecast, aka a haircut. The PF going below 100% is just the exact same thing in a different format - bad debts are greater than expected so you are going to get a lower return. Even if this happens it will not necessarily be a big problem - it will depend on what is happening to other asset classes at the same time, i.e. it is RS performance relative to others that matters, not its performance relative to its own past. The real problem for RS is that a PF below 100% will invalidate a lot of their brand proposition. The good thing about the PF is that RS can take more contributions from new borrowers to bail out old lenders if it wants (and has to some degree already happened in its history), something that Zopa and FC can't do. Interested to see your optimism and glad someone has provided a different assessment to mine. I agree that Zopa did announce a reduced return on previous lending as well as cutting expected future rates. I would argue that this is not a "haircut" although I can see that it could be seen as such. Knowledgable Zopa Plus & Core investors understood that what they were investing in was a significantly higher average interest rate from which bad debts would have to be suffered. In addition, the headline rate was an estimate as the mix varied from borrower to borrower and month to month. As such the announcement was a change in estimates. In contrast, the RS approach pushes the expectation of receiving the known interest rates requested. I suspect that an announcement that they were retaining a proportion of the interest would come as a shock to most who had never seriously considered the impact of the PF Event.
Arguably what has happenned many times with announcements that the bad debt performance was worse than expected (indeed acknowledgement that for most of the money lent long enough ago to have a good guide to loan performance the bad debts will exceed the money paid in respect of them to the PF). This in turn made it clear that a higher payment would be required into the PF on future loans to cover this deficit. I am aware that they have obscured this latter obfuscating by increasing the risk level (and hence APR) so that after paying this additional premium rates remained comparable.
What I want to know is how they will manage the Event. Will they announce a flat proportional reduction in loan interest / withdrawal of interest and proportional reduction in capital of existing loans on the date of the announcement with no reduction on future loans? I think that this would give them the best chance of continuing in business as the impact on future investment would merely be the reduced PF coverage (presumably the action would only aim to increase the coverage ratio to 100%), a greater realisation of the risk and presumably they would again increase the proportion retained on new loans for the fund to rebuild the buffer and cover further minor reductions in loan performance. Any impact on new loans should merely raise the minimum investmet on the new loans and probably price them out of the market to such an extent that loan volumes (and hence RS income) would plummet. Conversely they might adopt the latter approach to give a larger pool of interest on which todraw and thereby reduce the necessary rpoportion that needed to be diverted to the PF. This might work on the grounds that there is a large amount of passive money much of which might not adjust to the continued reduction. In the short term at least, I would expect the passively recycled funds to provide the vast majority of the investment and so rates might not rise much and volumes not fall as catastrophically as expected. Against this, there may be sufficient active investors (or who become active in light of disclosures of the Event) selling loans to absorb a significant proportion of the Passive funds making this optimistic scenario less likely.
How do you see the likely reactions?
- PM
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aju
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Post by aju on Apr 5, 2019 14:58:42 GMT
Thanks guys i'll keep my eyes on the PF numbers and react as I see fit - probably the way you predict if i'm honest!. since I may not be the only one doing this I reckon the time to consider this would be 105% and below but others will make their own judgments. It would be nice if RS could actually give more concrete figures though the answer that Ratesetter was allowed to give did not really help that much I feel. edit: Actually as there are 2 PF numbers 118% for the Interest part and 234% for the Capital part, this page seems very confusing and trying to gauge when I should bail out so I don't lose any of my capital is difficult.
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reinvestor
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Post by reinvestor on Apr 5, 2019 16:07:32 GMT
Ratesetter: when will vehicle Stocking Limited be filing its accounts?
They should have been filed on 31st December last year.
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ashtondav
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Post by ashtondav on Apr 5, 2019 16:32:39 GMT
Ratesetter: when will vehicle Stocking Limited be filing its accounts? They should have been filed on 31st December last year. Naughty, very very naughty....
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wapping35
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Post by wapping35 on Apr 5, 2019 17:16:31 GMT
Dear wapping35 Thank you for you questions. We announced on 21 March that our website data, including the Provision Fund Coverage Ratios, will be updated in the last week of each month. This change was made to improve data accuracy. As regards the Interest Coverage Ratio target, our post of 22 March was correct at the time of posting. RateSetter continually assesses the optimal way to deliver positive outcomes and we are committed to always communicating clearly any changes that may affect you as an investor. Thank you. Dear RateSetter Thank you for your post but your reply has not answered the question. You say you will update the numbers at the end of the Month and you said that in March so end of that month is March 31, and the updated number was due April 1. So simple question when is the next update to be published ?? It is due April 1st according to what you have stated, if that is not the case when will the number be updated ? If you are saying you are not starting the process in March and instead you are doing it in April then just state that and confirm we will have a PF coverage ratio published at the end of April (I assume for May 1). Regards W35 EDIT: RateSetter in view of the importance of this to me as an investor I have contact your Customer Services section directly for a precise answer.
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Post by RateSetter on Apr 7, 2019 11:43:37 GMT
Hi wapping35. In the last week of April, the website figures will be updated for April 1. This will be the pattern each month. Thank you.
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