Time to pull the plug on P2P?

I have.

I never put much weight behind FCA authorisation; somewhat coincidentally I was reducing my holdings as most firms received their authorisation. In my mind risks have been increasing over the past 18 months and yet returns have been falling. I have had a very good run over 10 years, but the institutions have moved into this space and there is no room for most of the poorly managed P2P players (I don't think all are poorly managed).

Apart from defaults I have exited all P2P, apart from Ratesetter which has been in permanent draw-down for over 3 years. My holding is about 10-15% of its peak. In general I have been moving away from less liquid assets, if I can do this at little cost.

I have been accused by some on this forum of being a panic seller, so maybe you shouldn't listen to me.

I am partially out of p2p since late September. Still have investments I cannot cash in until next year in lendinvest,kuflink, and crowdproperty totalling around 7k.
Had 28k at my peak. I miss the interest but security of my capital is more important.

At the end of the day P2P in away is not really new its just a different spin with a new name on an old product and while the FCA could do more at this point in time it could also be said that it's also true for other forms of investing as well.In someways the legislation that allowed p2p to flourish with a band wagon of companies starting up and then making it look safer by including the ISA which to most people the word means safety(they see ISA products in the high street every day so it must be safe surely) plus the public's expectations of risk/reward are what has defined the last couple of years
         To me P2P is nothing more then taking the racing club idea of 25 years back and putting into a loan product i.e some HNW people owned horses and made it pay by the law of averages or did it at a loss for fun,then came a couple of racing clubs where you could buy part of a horse and maybe make some money while having fun.But then after a couple of years you had dozens of clubs spring up chasing the same investors but not with the same quality of horse racing stock so those people ended up with old nags
         P2P is the same but with loans instead of horses in that there's not enough good stock out there for every platform so the bottom of the pool floats up to be used by someone.its probably true that a couple of strong platforms could survive and become successful but them companies have always been there(private or ltd) along with the banks lending money for decades(i would guess for the general public in p2p it will need to a Blackbox with lower rates to really take off)
The thing with banks/loan companies is that they understand the lower profit on things like mortgages etc and are happy but we have been led to expect 6 -15% which is unattainable.                                                                    If the powers that be want a low risk ISA "savings" product as some platforms suggest in marketing(even when i was complaining about lower rates on RS in the week!) then the product needs looking at again as to whats allowed and what goes back to being called high risk such as property development.And also no new players allowed in the market unless the company is a certain size and with assets behind it backing the product as every new start up is just increasing the risk and potential for more bad publicity down the road

Mention is made of failure of lendy/collateral/FS, but Wellesley also went t**s up before these.

"I believe that the P2P sector is an early indicator of the health of the whole economy, even the whole world economy."

Why should the relatively tiny and immature P2P market be a better economic indicator than those markets traditionally considered to be the best forward indicators, namely the enormously sophisticated global bond market, and also the FX and equity markets ?

"Gold might be a good investment."

Again , why ? It earns no interest at all (unlike P2P, and most stocks pay a dividend), and gold also has very little utility. Warren Buffet puts it best, albeit a bit tongue-in-cheek :

"Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head."

Well I'm sure you get the point - apart from the relatively tiny jewellery market, gold is hardly used for anything. A good measure of the value of something is to gauge how life would be without that commodity.  eg.  a world without  iron or nickel would almost unthinkable (no steel for starters) but what about a world without Gold ?  Very little disruption compared to most other items of value - damn near "business as usual" tbh.

While looking at Lendinvest as being profitable does it really fit the idea of p2p or what was out there over 10 years ago as a HNW product unknown to the masses.From platforms to people on the forum,if everybody was being honest there has not been quite the uptake as expected but there has been some growth in p2p.But i would guess moving forward that after a negative couple of years and the media taking pot shots etc that for a mass explosion to occur now,it will take a big name and a passive style product to make the IFISA a winner (personally i don't see a market for Joe public anymore at the higher risk end of P2p only niche for those already invested or back to the days of HNW)
What would be interesting but is shades of the Big Short movie is what would be the uptake of the public of say a fixed bond for 5 - 10 years backed by loans paying maybe 4% from the likes of Barclays or a newer player like Marcus (not sure if Goldman Sachs still do p2p in America )but its the size of company required probably

I’d have to agree that it’s time to pull the plug on P2P.


Not that I want to. I’d like the model to work. I’d like to invest in something accretive; something that would help someone build something, employ people and benefit the rest of us. Additionally, I really enjoyed P2P investing.


Especially opposed to the rest of my investments which realistically have increased because of share buybacks courtesy of cheap money.


Unfortunately, I don’t see how my – maybe naïve – sentiments are going to reconcile themselves with the current vogue of Unicorn culture and rushing to get scale at all costs. In this model where it is assumed that the winner will take all, we’re in danger of everyone losing (how are WeWork and Uber doing?).


I’m sorry for those that haven’t been but I’ve been lucky. I started drawing down from FC when their model changed (yes they a going concern but their share price going from around 460p in their first week of trading post IPO to 96p at the end of this week isn’t – for me – a good sign). Lendy I sold out of everything I could after seeing a rather “merry” interview given at Cowes week. The FS account was drawn down to the bare bones following one too many fiascoes.


I realise that people will have different views on whether or not the economy is to blame and – again for me and my two cents – it is. It has exposed the implementation of the P2P business model rather than (my maybe idealistic idea of) the model itself. A traditional pawn shop style business should be doing well in a downturn – not going to the wall.


On a slightly different point that has been mentioned in this thread.


I’m definitely wouldn’t call myself a goldbug. However last week I took my mum up to London and we came back with something to hide under the floorboards and I’ve got some silver coming in from Europe tomorrow. I have no idea whether Fed intervention in the Repo markets is QE4 or not. All I know is that I have something whose supply IS limited by someone’s ability to dig it out of the ground not create it from thin air.


I may be right I may be wrong.


Unfortunately, with human nature the way it is there is a reason why Homes Under The Hammer is on for an hour every weekday morning. I want gold because it doesn’t do anything, doesn’t pay a dividend and basically just sits there doing nothing. It wouldn’t make a good TV programme. Both markets have (again IMHO – other people will have other views that I don’t necessarily disagree with) gone up for essentially the same reason but they will fall for different reasons.


I’m happy to take that as a bet.