LendInvest gains FSCS coverage | P2P Independent Forum

yangmills
Member of DD Central

Posts: 83
Likes: 494

LendInvest gains FSCS coverage Aug 26, 2018 14:29:43 GMT archie likes this

Quote

Post by yangmills on Aug 26, 2018 14:29:43 GMT

See link

Ok by some technical definitions LI are not P2P. Technically, investments made via the LendInvest platform are an investment in an alternative investment fund, and these funds in turn invest in the loans originated by the platform. I see this as a rather neat way to do P2P without being formally P2P and with stronger regulatory protections. By redefining itself as an AIFM, rather than P2P platform, it's probably also made FSCS cover easier to get.

I don't invest in LI anymore but I do still own one of their Lux based SICAV funds. Still outperforms their platform and also outperforms most "high risk" property P2P platforms. That's with a 2% management fee and 25% performance fee. Then again on those platforms you are effectively paying a 12% management fee so no surprise really.

“A common mistake that people make when trying to design something completely foolproof is to underestimate the ingenuity of complete fools.” Douglas Adams

arby
Member of DD Central

Posts: 910
Likes: 959

LendInvest gains FSCS coverage Aug 27, 2018 11:32:12 GMT

Quote

Post by arby on Aug 27, 2018 11:32:12 GMT

Aug 26, 2018 14:29:43 GMT yangmills said:

See link

Ok by some technical definitions LI are not P2P. Technically, investments made via the LendInvest platform are an investment in an alternative investment fund, and these funds in turn invest in the loans originated by the platform. I see this as a rather neat way to do P2P without being formally P2P and with stronger regulatory protections. By redefining itself as an AIFM, rather than P2P platform, it's probably also made FSCS cover easier to get.

I don't invest in LI anymore but I do still own one of their Lux based SICAV funds. Still outperforms their platform and also outperforms most "high risk" property P2P platforms. That's with a 2% management fee and 25% performance fee. Then again on those platforms you are effectively paying a 12% management fee so no surprise really.

What's the 25% performance fee? You pay 25% of any gains as a profit commission?

yangmills
Member of DD Central

Posts: 83
Likes: 494

LendInvest gains FSCS coverage Aug 27, 2018 12:20:15 GMT

Quote

Post by yangmills on Aug 27, 2018 12:20:15 GMT

arby. Yes, I pay a 2% management fee and 25% of the net return after that. So if the fund charges an average 14% to borrowers, I get 12% after the management fee and 9% after the performance fee (this assumes no defaults). The fund has delivered about 8-9% net over the past four years, which I would argue is decent (but not special) for a hands-off investment that can be easily wrapped in an ISA or SIPP (so equivalent to 15-16% for a 45% taxpayer like myself) and has some liquidity. It's also higher than any possible return you could have generated on the LI P2P platform which has zero liquidity (no SM) and is hard to tax wrap.

Of course the fees are incredibly steep compared to any other type of fund. They are even steep compared to most hedge funds. I'm getting only 65% participation in the gross return. However, compared to property P2P platforms, the 2% management fee and 25% performance fee is cheap. The likes of Lendy, FS, MT, Abl etc charge spreads of 10%+ on their loans, so you as an investor you are lucky to get 50% participation in the borrowers' rate. Worse, they take that irrespective of whether the loans performs or not. In a situation where the loan portfolio loses money, at least I "only" pay 2% on the LI fund, I'd still pay 12% to Lendy, Abl etc.

“A common mistake that people make when trying to design something completely foolproof is to underestimate the ingenuity of complete fools.” Douglas Adams