sapphire
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Post by sapphire on Jun 21, 2019 8:06:32 GMT
ceejay Many thanks for sharing your thoughts and experience. Indeed one should not blindly rely on third party opinions and always carefully analyse and assess these before deciding whats appropriate for one's own circumstances. I had browsed through your other posts and your judicious responses suggested one whose input could provide useful guidance. Your above prudent response is helpful. A couple of my thoughts. *AC do not appear to disclose the interest rate and other charges payable by the borrower so lack of this info (to some extent) impedes assessing the full risk picture (and so the chances of default) of a particular loan. *When assessing and comparing various MLA loans, the lender interest rate does not always seem to be aligned to the loan risk level i.e. some loans (especially the development ones) offering x% interest seem to offer lesser value compared to others (in a different category) offering a rate higher than x% with a better level of security and a lower level of risk. Happy to be enlightened if I am missing something. Cheers.
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Post by brightspark on Jun 21, 2019 8:52:37 GMT
The other point worth a mention is that once a loan is made performance should be very regularly monitored and possibly sold if impending problems become suspected. Of interest if all loans on the website are ordered by interest rate once the 8% barrier is breached the number with problems increases markedly. In this respect I do not support a previous poster that over 7.5% plus is a target. Historically that may have been the case but as available interest rates offered have fallen in my view expectations have needed to follow a similar trajectory.
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ceejay
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Post by ceejay on Jun 21, 2019 9:11:23 GMT
The other point worth a mention is that once a loan is made performance should be very regularly monitored and possibly sold if impending problems become suspected. Of interest if all loans on the website are ordered by interest rate once the 8% barrier is breached the number with problems increases markedly. In this respect I do not support a previous poster that over 7.5% plus is a target. Historically that may have been the case but as available interest rates offered have fallen in my view expectations have needed to follow a similar trajectory. It's certainly true that if you sort loans by interest rate then you'll see a lot of troublesome ones at the top. One reason for this is that if a loan starts to have trouble - breaking terms, say, or requiring an extension in trying circumstances - then the interest rate can go up. Another reason is historical - interest rates were higher previously, and I'm fairly sure that AC's loan-building has improved over the years. But, of course, in general higher rates should imply higher risk (though the correlation will be weak because these loans are products being sold in a competitive market). Sometimes - increasingly rarely just at the moment - discounts are available, especially if an underwriter has been called on to fund some new loan or tranche and wants to unload so they can move on to the next thing. These can help bring a few more loans into desirable range. I will definitely agree, though, that loan monitoring is required. I use some simple spreadsheetery to highlight loans where the repayments are not on time (with a little tolerance) and make a point of investigating. I've managed to avoid at least one car crash by this simple method, although it does take effort - hence my other comment about limiting the number of loans I want to be involved in.
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lobster
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Post by lobster on Jun 21, 2019 9:16:42 GMT
*AC do not appear to disclose the interest rate and other charges payable by the borrower so lack of this info (to some extent) impedes assessing the full risk picture (and so the chances of default) of a particular loan. This is true, but nonetheless the interest rate paid by the borrower can often be inferred from the credit report, where the borrowers repayment schedule is often referenced.
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IFISAcava
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Post by IFISAcava on Jun 21, 2019 9:44:00 GMT
The other point worth a mention is that once a loan is made performance should be very regularly monitored and possibly sold if impending problems become suspected. Of interest if all loans on the website are ordered by interest rate once the 8% barrier is breached the number with problems increases markedly. In this respect I do not support a previous poster that over 7.5% plus is a target. Historically that may have been the case but as available interest rates offered have fallen in my view expectations have needed to follow a similar trajectory. Agreed For me I target low LTV rather than high interest rates, and am happy to accept lower rates for diversity (and recently you could get decent discounts on many lower rate loans). A huge advantage of the MLA is that you can sell at a discount, which you can't with the packaged accounts, which improves (although does not of course guarantee) liquidity. I have an average of 7.45% in the MLA now, across 350 loans, and I have spare funds in QAA/30-day/90-day. I wouldn't touch the GBBA or PSA. EDIT: of the 350, 4 are in trouble (2 of which are different tranches of the same loan), representing ~1 in 88 loans and 0.25% of capital I have invested in MLA.
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IFISAcava
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Post by IFISAcava on Jun 21, 2019 10:18:25 GMT
The other point worth a mention is that once a loan is made performance should be very regularly monitored and possibly sold if impending problems become suspected. Of interest if all loans on the website are ordered by interest rate once the 8% barrier is breached the number with problems increases markedly. In this respect I do not support a previous poster that over 7.5% plus is a target. Historically that may have been the case but as available interest rates offered have fallen in my view expectations have needed to follow a similar trajectory. One other things of relevance is that it is easier to sell loans that have a higher rate because many people do adopt the "not worth investing unless 7.5%/8% or higher" approach.
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sapphire
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Post by sapphire on Jun 21, 2019 11:19:32 GMT
*AC do not appear to disclose the interest rate and other charges payable by the borrower so lack of this info (to some extent) impedes assessing the full risk picture (and so the chances of default) of a particular loan. This is true, but nonetheless the interest rate paid by the borrower can often be inferred from the credit report, where the borrowers repayment schedule is often referenced. Thanks lobster I have had a look at a few credit reports and couldn't find details of the borrowers repayment schedule to help infer their rate. Any idea if these details are provided only for a particular type/category of loans? It would be helpful if you are able to provide an example of a loan number where this info is included. (Hope I am not overlooking something obvious!)
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Post by alexp2p on Jun 21, 2019 12:52:39 GMT
I have also looked at some credit reports and it is not always obvious.
However for one loan #451 the interest rate for the lender and Assetz can derived.
Stated interest rate =7% and regular payment schedule = 700 GBP
Payment to AC is 844 GBP
So interest rate to AC should be 7% X (844/700) = 8.44%
Cheers
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Post by Ton ⓉⓞⓃ on Jun 23, 2019 20:09:16 GMT
Thinking about AC's margin this might be helpful Thanks for your answer Stuart. What you are saying is the monitoring charge, which comes off the borrower rate thus reducing interest to lenders, is used to pay these fees to third party recovery agents? Seems like lenders are paying then, in a way, to recover debts without awareness. As interest rates to lenders are trending downwards could it be that the gap to borrower rates is being widened to give yourselves an invisible costs provision fund at our expense? I may be on absolutely the wrong track and doing am accountants trick with smoke and mirrors to make 2 and 2 equal 21 after tax. Hi. All valid questions but I can confirm that we have not widened the monitoring income margin that we deduct from the borrower rate before paying investors. That is pretty consistent for a long time and is typically 0.9% from the borrower rate. So what lenders have seen with the MLA rate reducing over time is the effect of lower borrower costs being passed directly on. Regarding the investment accounts therefore it can be seen that every penny difference between the MLA rate and the rate paid on the investment account is going into the provision fund for that account and is for the benefit of the investors. That's how it works and there are definitely no smoke and mirrors. I hope that helps. This post is just over a year old, there were some much earlier loans where the margin was a little higher I believe.
On Bridging loans, they can have quite a low LTV in the region of 50%, but that doesn't mean low risk. i take that as a sign of how likely, as a sector, they're likely to hit trouble and need to cover their losses.
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Post by df on Jun 24, 2019 15:15:34 GMT
Not my experience at all. I have just under 100 loans in MLA. Of those, I reckon 7 are in distress (suspended and/or significantly late). 2 - probable write off (more or less) 2 - receiver appointed or in process (might have to take a hair cut, who knows) 3 - pending (too early to say what the outcome will be) Across my AC portfolio, which also includes some QAA and 30DAA, my current estimated XIRR (allowing for identified potential losses) is around 6.6%. There will be more issues, I presume, but the ratios seem good to me. I am relatively new to investing via AC's MLA (I have invested in specific loans on other platforms), so would appreciate thoughts from someone who has invested in almost a 100 here. I would also welcome input from others. * What selection criteria do you use? Do you focus on particular categories (say Bridging, Commercial Mortgage?) or invest across all categories of loans? *Do you invest a similar amount across all loans or vary the amount considerably depending on your judgement of the attractiveness of the loan? Is there a max percentage limit of your overall AC MLA portfolio you invest in a single loan? *In another post you mentioned very poor returns on some AC loans due to "dodgy security". It would helpful if you could provide some examples of loan numbers so I can review and be more alert in the future! Thanks. My MLA strategy is very primitive. May not be the most effective, but works for me. Selection criteria is 7%+ or lower rate with discounts that make up to 7%+. All category of loans. Anything below 7% is invested via access accounts. The same (very small) amount per loan. Currently I'm in 315 loans. No multiples to the same borrower (except some very old ones where I can't do anything about them). My average exposure to a single loan is at around 0.6%. I put all loans for sale when they have 3 months of term left. I've stopped reading documents long time ago as it is very time consuming, not worth for the amount I invest in each loan and I don't have an expertise to predict whether a loan will have successful ending. I rely on AS's DD. It's the same strategy I have with LC and Rebs, except the the minimum rate. It has to be higher for unsecured loans.
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Post by captainconfident on Jun 24, 2019 15:36:18 GMT
I have exactly the same strategy as you df, and the same three platforms. We're going to sink or swim together. I see these AC, LC and Rebs as being in different parts of the market, with low, medium and higher risks together forming a diverse enough portfolio. Least enthusiasm reserved for AC due to the shock of the way I (and all early investors) was treated as a GBBA1 lender. |
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Post by df on Jun 24, 2019 19:51:32 GMT
I have exactly the same strategy as you df , and the same three platforms. We're going to sink or swim together. I see these AC, LC and Rebs as being in different parts of the market, with low, medium and higher risks together forming a diverse enough portfolio. Least enthusiasm reserved for AC due to the shock of the way I (and all early investors) was treated as a GBBA1 lender.  It feels like swimming so far. 11%+ on Rebs, 8%+ on LC and around 7% on MLA. I hope we won't sink Prior to joining Rebs I was reading very negative reviews (couldn't find any positive), but still decided to give it a go with very small amount - was a big mistake treating Rebs as the riskiest (hence tiny proportion of my p2p) and pouring money into SS, FS and Col. Yes, GBBA1 and GEIA is a very negative experience. I'm happy with access accounts and MLA, they perform very well, but so far my historical profit from these is significantly less than the amount currently stuck in Great&Green. I trust AC will honour their commitment to repay I**, but with other loans I'm not sure if relevant PF's have capacity to cover capital losses. Despite all this, AC remains my first platform (18% of my p2p).
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Post by captainconfident on Jun 24, 2019 20:21:44 GMT
Same with me for Rebs - I regret being so cautious. People seemed to be wishing for it to fail a few years ago and I was worried that it might fold. It's also my best long term returns along with the most excellent FK (11.3%) which I went into big time and still gradually running down. In AC (25% of my p2p holdings, 17% of that locked into GBBA1 purgatory), most of the money stands right next to the exit, ready to duck out at the shortest notice, if you know what I mean. I do recommend reading this and thinking what it might mean for our borrowers:- blogs.spectator.co.uk/2019/06/ivan-rogers-no-deal-is-now-the-most-likely-outcome/ |
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criston
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Post by criston on Jul 11, 2019 11:01:54 GMT
My first possible default (951) across the 100 odd companies I have invested in, since I began with AC at the start of this year.
Now I can see how things will be handled.
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bg
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Post by bg on Jul 11, 2019 11:20:50 GMT
My first possible default (951) across the 100 odd companies I have invested in, since I began with AC at the start of this year. Now I can see how things will be handled. Well hopefully it's just a dispute about a small debt. We shall see.
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It feels like swimming so far. 11%+ on Rebs, 8%+ on LC and around 7% on MLA. I hope we won't sink