Are you comfortable with Zopa?

Hmmm!

So what I am about to say is just my take on how the defaults seem to pan out, make of it what you wish but you could be in the potential danger zone for D&E loans from Mar through to August's lending - I think thats when zopa suggested they were reducing their commitment to D&E in Z+ from 30% to 15% due to higher default rates than expected. I wonder how many D&E's you may have in the  book so far?. You will need to wait at least 4 months for a default to even materialize and then its usually in the during the period of month 12 - to month 18 although I checked my book for this pattern and it did not align quite that way.

It has to be said even on Zopa Classic the defaults can be thick and fast on a 2800 loan book - 58 defaults since classic started and not a D&E in sight - it's just that the SG fund is paying for those.

Assuming all of this investment is in Z+ and since it takes at least 4 months to be in default anyway then I'm wondering if before you reach the end of a 12 month cycle let alone the 18 months you may be a bit more down defaults wise than you think. You could be in for a much bigger hit. Hopefully you lent at <£2000 blocks - although with that much lent out I suspect not - to prevent larger loan values. I know that having 1000 £10 loans compared to 200 £50 loans indicates the the same losses perhaps at face value. But I have a lot £50 loans in classic that have not been defaulted. Most of my defaults so far are in fact £10 ones with one £20 usurper. Thats not to say I am not suffering from defaults.

I'm assuming you are in relend mode for the whole book so that at least maximises your return but to be honest until you have had at least a year in investment you are unlikely to know what your return might be let alone ongoing. 

For the record my exposure to Plus relative to my whole book both Invest and recently ISA is about 10%, even now that seems too adventurous. When I saw the default amount in Classic on £11000 was some £580 I was comforted by the fact that it was only a notional loss being covered by SG. Thats the rate I may have lost - most had already paid at least 4 months before they defaulted so its not simply the lent amount - that would have hit my classic return rate considerably were it not for the buffer. 

Using year to date or annual statements for last 3 years and despite having >£200 default debt my return is quite stable but showing a slight reduction over the 3 years as follows.

2015 - 5.34% 0.5 lenders fees in 1st 3 months
2016 - 5.32%
2017 - 4.98% this is 12 month projected from Jan to Mid Dec result as December final is still to come.

This set includes 0.5% early adopter bonus and is before tax.

This would be lot less I feel if I had been more exposed to Plus during that cycle but its not bad I am happy with it. I've been lucky this month no defaults yet but 2 last month so its highly likely there will be more. ISA is doing good amounts though at the moment but again the collections are mounting so we'll see. I'm not about to bail though. 5% is way better than I'm getting on all even the best current accounts at the moment.

Edit:

Mrs Aju's figures show similar but she has not got early adopter fee (0.5%)

2015 - 4.77% (lenders fees early in the year Jan to Mar)
2016 - 4.97%
2017 - 4.3%

(The 2017 figure for Mrs Aju is slightly skewed as she doubled here classic investment in June so I calculated in two halves. and then projected to end of year. Again she is exposed 10% to Plus.)

Am I comfortable with Zopa ?

Lol... No !


The USP of Zopa was it's promise of interest rate returns much better than that of building societies and banks all protected by it's 'Safeguard' protection, and claim that 'No investor has ever lost a penny!'

That's all gone !! Why is anybody still in Zopa ? Step outside the front door and look at the alternatives ! There is better investment opportunities. Also, as a company in it's own right I believe Zopa has filed losses in the last few years, whilst acceptable for fledgling companies, Zopa is the Grand Daddy of this sector ! I wonder if ditching the protection fund was an enforced decision so the company was not dragged down into oblivion. It's better for investors to lose money than Zopa itself right ? 

Yes... Safeguard is still in place for legacy products, My Father has one and it is being drawn down and invested elsewhere.

So the bottom line <literally>

Poor returns, high risk, very uncomfortable

That was "the USP" if you were late to the party, and even then it wasn't very unique - in fact safeguard was pretty much copied from RS.
The original USP (look up what 'ZOPA' stood for) was the ability to pick your borrowers and/or set your rates .. hopefully finding some overlap between what you'd be prepared to take and what the borrowers would be prepared to pay. That one got kicked into the dusty corners long ago (which was about the point I left, and I hadn't long arrived by then).

Exactly my position and views. 


I just sold all my remaining Plus and Core loans, preferring to take the 1% hit rather than risk the increasing defaults.  I'm not reinvesting in Zopa and am gradually withdrawing funds as they are repaid from my remaining (SG) loans.  The returns just don't cover the risks anymore.

Once upon a time you could select your own loans with zopa, something I never got involved in and there were losses there, but zopa's claim refers the loans they match for you and todate they are probably right on that, certainly I have made 2k on my meager investment and its still growing but thats all been under safeguard which is now gone...  Time will tell if the funds continue to grow but and I continue to monitor the situation carefully.. 

Never heard that one, and I've been with Zopa since 2008.  Pretty sure they wouldn't say it (given the 'listings' bloodbath).


Safeguard & provision funds in general are basically just an averaging device, they do not give you any real protection in the event of a major economic downturn.  If you are sufficiently diversified you are better off without it.   (Prior to the tax changes on losses a few years ago, SG was genuinely useful for tax payers, but I've never understood why they kept it going after that point).


Am I comfortable with Zopa?   Well, in general yes (and recently moved a bunch more money in), but you need to be diversified as much as possible (£10 loans). 


In the case of Z+ (and the earlier C, D & E markets) ... I've only ever put a small amount of money there.  Stayed well away from Listings (available 2007-2011 or so), they were an obvious disaster area with people bidding ridiculously low.

Anyone know the validity of the website can't pay my bills.. page on Z, appears written by Z.