Post by sl75 on Nov 14, 2019 16:48:05 GMT
There are neither provisions for further losses against the "late" portion, nor provision for further gains due to recoveries from the "bad debt" portion.
This may result in annualised return being overstated or understated depending on which effect is expected to be larger on your account.
As some of the "late" loans turn into "bad debt" and some of the "bad debt" is recovered, the reported rate will adapt to reflect these.
Whether that eventually (e.g. 5 years down the line) results in you getting a final figure that is higher, lower, or the same as your current 3.6% remains an open question.
Regarding "why would it be difficult to produce a 365 day return" - I refer you back to my earlier comment. What is the correct 365 day return on a portfolio that starts the 365 day period with a nominal value of £0.00, ends the 365 day period with the same nominal value of £0.00, and has £100 of recovery payments received during the intervening 365 days? Do you want to divide £100 by zero?