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Post by vaelin on Feb 15, 2018 18:33:49 GMT
Hello all,
First, I am new to the forum. Nice to be here!
Second, I wonder if I could get your opinions on investing strategy. I don't really have the experience to reliably assess the relative risk of any individual loan. I can make educated guesses about which may be more risky, but nuances are lost on me.
However, the average return for MLA loans is higher than you can get in the GBBA2, which makes the MLA more attractive. Is it sensible to target that higher rate of interest by simply investing small equal amounts blindly in a broad array of loans in the MLA? For example, is it a reasonable strategy to invest x in 100 MLA loans without doing individual risk assessments? How would that differ from the blind allocation in the GBBA2 other than a lack of the provision fund?
Thanks!
Vaelin
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SteveT
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Post by SteveT on Feb 15, 2018 18:38:42 GMT
Yes, it's a fairly sensible strategy. You'd earn a higher rate of gross interest and be widely diversified, which likely (but not guaranteed) would earn you more than the GBBA2 once occasional inevitable losses are factored in. It's just a little bit more work (but not much, in honesty). Most MLIA lenders follow a broadly similar approach.
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jlend
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Post by jlend on Feb 15, 2018 18:46:16 GMT
Hello all, First, I am new to the forum. Nice to be here! Second, I wonder if I could get your opinions on investing strategy. I don't really have the experience to reliably assess the relative risk of any individual loan. I can make educated guesses about which may be more risky, but nuances are lost on me. However, the average return for MLA loans is higher than you can get in the GBBA2, which makes the MLA more attractive. Is it sensible to target that higher rate of interest by simply investing small equal amounts blindly in a broad array of loans in the MLA? For example, is it a reasonable strategy to invest x in 100 MLA loans without doing individual risk assessments? How would that differ from the blind allocation in the GBBA2 other than a lack of the provision fund? Thanks! Vaelin I've always wondered why AC didn't build an automated investment account that did just that. It might take some time to get fully invested but seems like something some investors would take up.
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Post by vaelin on Feb 15, 2018 18:53:13 GMT
Hello all, First, I am new to the forum. Nice to be here! Second, I wonder if I could get your opinions on investing strategy. I don't really have the experience to reliably assess the relative risk of any individual loan. I can make educated guesses about which may be more risky, but nuances are lost on me. However, the average return for MLA loans is higher than you can get in the GBBA2, which makes the MLA more attractive. Is it sensible to target that higher rate of interest by simply investing small equal amounts blindly in a broad array of loans in the MLA? For example, is it a reasonable strategy to invest x in 100 MLA loans without doing individual risk assessments? How would that differ from the blind allocation in the GBBA2 other than a lack of the provision fund? Thanks! Vaelin I've always wondered why AC didn't build an automated investment account that did just that. It might take some time to get fully invested but seems like something some investors would take up. Presumably AC makes a higher margin on the automated investment accounts, so creating higher barriers to entry to the MLA (i.e. increased difficulty) pushes people towards those other accounts.
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jlend
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Post by jlend on Feb 15, 2018 18:59:36 GMT
I've always wondered why AC didn't build an automated investment account that did just that. It might take some time to get fully invested but seems like something some investors would take up. Presumably AC makes a higher margin on the automated investment accounts, so creating higher barriers to entry to the MLA (i.e. increased difficulty) pushes people towards those other accounts. It is a very good point. However they say their fees are exactly the same on all the accounts.
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Post by vaelin on Feb 15, 2018 19:07:57 GMT
Presumably AC makes a higher margin on the automated investment accounts, so creating higher barriers to entry to the MLA (i.e. increased difficulty) pushes people towards those other accounts. It is a very good point. However they say their fees are exactly the same on all the accounts. Though they must pocket the difference in repayments? If someone invests in a 7% loan at 3.75% via the DAA, then 3.25% of the interest must be returned to AC? It is a brilliant business model: people give some of their returns to AC in exchange for convenience. Unless I have misunderstood how this works.
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SteveT
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Post by SteveT on Feb 15, 2018 19:12:02 GMT
It is a very good point. However they say their fees are exactly the same on all the accounts. Though they must pocket the difference in repayments? If someone invests in a 7% loan at 3.75% via the DAA, then 3.25% of the interest must be returned to AC? It is a brilliant business model: people give some of their returns to AC in exchange for convenience. Unless I have misunderstood how this works. Not quite. A large portion (unquantified but hinted historically at 40-50%, although might be lower these days) of QAA/30DAA funds is held as cash to ensure "highly reliable" liquidity. Also presumably as a float to underwrite upcoming AC loans.
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Post by chris on Feb 15, 2018 19:12:14 GMT
It is a very good point. However they say their fees are exactly the same on all the accounts. Though they must pocket the difference in repayments? If someone invests in a 7% loan at 3.75% via the DAA, then 3.25% of the interest must be returned to AC? It is a brilliant business model: people give some of their returns to AC in exchange for convenience. Unless I have misunderstood how this works. 100% of the difference in rate goes into the relevant provision fund. AC earns the same fee regardless of the account doing the investing.
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Post by Butch Cassidy on Feb 15, 2018 19:20:14 GMT
Sorry to pour cold water onto what appears a perfectly sensible theory but it doesn't work; AC issue 100% of new loans to their own accounts, usually QAA, & then at some point later, which can be days or weeks they decide (a manual decision but no clarity on who/why/when or how much) to release an uncertain % to the SM for the other accounts including MLIA to fight over. So any popular/small or high % loans lead to allocations of <£10/account, often just a few £'s, so it proves impossible to build any meaningful holding in anything other than the largest &/or most unpopular loans.
Often after 12 months with constant targets & money available holdings still don't reach 3 figures so unless you have a very small overall investment the system simply doesn't work. Why do AC continue with this system when demand from just MLIA accounts is so often unsatisfied? Well they say it is how the system was originally set up & changing it would involve too much IT work & now that other collective accounts are more important it might not seem fair to allow MLIA holders a set % share of each loan - but MLIA accounts are still important & there are no plans to discontinue them!
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Post by chris on Feb 15, 2018 19:32:35 GMT
Sorry to pour cold water onto what appears a perfectly sensible theory but it doesn't work; AC issue 100% of new loans to their own accounts, usually QAA, & then at some point later, which can be days or weeks they decide (a manual decision but no clarity on who/why/when or how much) to release an uncertain % to the SM for the other accounts including MLIA to fight over. So any popular/small or high % loans lead to allocations of <£10/account, often just a few £'s, so it proves impossible to build any meaningful holding in anything other than the largest &/or most unpopular loans.
Often after 12 months with constant targets & money available holdings still don't reach 3 figures so unless you have a very small overall investment the system simply doesn't work. Why do AC continue with this system when demand from just MLIA accounts is so often unsatisfied? Well they say it is how the system was originally set up & changing it would involve too much IT work & now that other collective accounts are more important it might not seem fair to allow MLIA holders a set % share of each loan - but MLIA accounts are still important & there are no plans to discontinue them! MLA has equal priority with the GBBA2 so there's no prioritisation or preferential treatment. If the GBBA2 can deploy funds in a loan then so can the MLA. I've raised the sell through policy internally as it's not an IT change that's required.
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Post by vaelin on Feb 15, 2018 19:39:45 GMT
Sorry to pour cold water onto what appears a perfectly sensible theory but it doesn't work; AC issue 100% of new loans to their own accounts, usually QAA, & then at some point later, which can be days or weeks they decide (a manual decision but no clarity on who/why/when or how much) to release an uncertain % to the SM for the other accounts including MLIA to fight over. So any popular/small or high % loans lead to allocations of <£10/account, often just a few £'s, so it proves impossible to build any meaningful holding in anything other than the largest &/or most unpopular loans.
Often after 12 months with constant targets & money available holdings still don't reach 3 figures so unless you have a very small overall investment the system simply doesn't work. Why do AC continue with this system when demand from just MLIA accounts is so often unsatisfied? Well they say it is how the system was originally set up & changing it would involve too much IT work & now that other collective accounts are more important it might not seem fair to allow MLIA holders a set % share of each loan - but MLIA accounts are still important & there are no plans to discontinue them! MLA has equal priority with the GBBA2 so there's no prioritisation or preferential treatment. If the GBBA2 can deploy funds in a loan then so can the MLA. I've raised the sell through policy internally as it's not an IT change that's required. Is there a reason you don't have a mechanism to automate this strategy as suggested by jlend above?
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Post by chris on Feb 15, 2018 20:04:30 GMT
MLA has equal priority with the GBBA2 so there's no prioritisation or preferential treatment. If the GBBA2 can deploy funds in a loan then so can the MLA. I've raised the sell through policy internally as it's not an IT change that's required. Is there a reason you don't have a mechanism to automate this strategy as suggested by jlend above? Not that I'm aware of beyond priorities. There's a system change that I'd guess will be released around May (with usual caution about likely accuracy of IT schedules) that would provide a solution along these lines.
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ceejay
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Post by ceejay on Feb 15, 2018 20:11:17 GMT
Sorry to pour cold water onto what appears a perfectly sensible theory but it doesn't work; AC issue 100% of new loans to their own accounts, usually QAA, & then at some point later, which can be days or weeks they decide (a manual decision but no clarity on who/why/when or how much) to release an uncertain % to the SM for the other accounts including MLIA to fight over. So any popular/small or high % loans lead to allocations of <£10/account, often just a few £'s, so it proves impossible to build any meaningful holding in anything other than the largest &/or most unpopular loans.
Often after 12 months with constant targets & money available holdings still don't reach 3 figures so unless you have a very small overall investment the system simply doesn't work. Why do AC continue with this system when demand from just MLIA accounts is so often unsatisfied? Well they say it is how the system was originally set up & changing it would involve too much IT work & now that other collective accounts are more important it might not seem fair to allow MLIA holders a set % share of each loan - but MLIA accounts are still important & there are no plans to discontinue them! Puzzled, as this is not my experience. Of the loans that have come to market in the last 8 months or so that I wanted to buy into via the MLA, I have reached my target (in the hundreds) in almost every one, fairly quickly.
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Post by crabbyoldgit on Feb 15, 2018 20:30:34 GMT
Hi as a i think small investor the Ac system kind of in small way favours me a bit, however as a 100% mlia invested as fast as I can get there 1% max per loan is where I am going , greed and a record of past performance has led me to be at 2% plus a bit in individual loans and that is dumb at my level of the diligence skills. Add a bit of common dog skills , 63 years of just life and visiting this site 3 times a day I hope will reduce my risk overall, however with the sd development
, which I felt totally secure, in going big time south it is to prove a diversified holding is all.
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Post by wayne12 on Feb 16, 2018 10:44:49 GMT
I tend to use the same method I used on FC, small amounts in each loan lets say £20 per loan to achieve diversification. I do have around 20% put into the other accounts however (PF is always attractive).
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