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Post by gramsky on Jan 8, 2020 11:00:31 GMT
I will be interested to hear from other investors how they have changed their investment strategy since the recent introduction of the 'risk categories'.
My previous strategy was to invest equal amounts (£250) in all loans above 7.5% interest rate.
I have since revised this to invest varying amounts depending on the ‘risk category’ ie £500 in low risk, £400 in medium low risk, £300 in medium risk, £200 in medium high risk and £100 in high risk.
This will leave me with about 10% of my money uninvested so I am now considering investing in all loans above 7% interest rate using the same strategy and maybe pull out of the high and medium high risk loans altogether.
My main concern here is that I am increasing/doubling my exposure in each loan invested in, although they may be of lower risk. Does a lower risk loan really have less chance of defaulting?
I have also decided to sell any loans that have a monitoring or credit event and am considering a 0.5% discount to speed things up.
What are investor’s thoughts?
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Post by ogglet on Jan 8, 2020 11:28:00 GMT
Yep, I've done exactly the same, based entirely on the risk assessment...even when my own assessment is somewhat different. However with my PtoP loans across several platforms, I have several "Low" risk loans which have defaulted or otherwise become problematical and lots of high risk loans which have concluded with absolutely no problems, this should point me in the direction of using my own judgement. That said, in a default situation, the low risk loan usually has a lower LTV and therefore more chance of paying back without loss.
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dead-money
Rocket to the Moon
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Post by dead-money on Jan 9, 2020 9:11:53 GMT
My MLA strategy is unchanged. Was reassured that the risk categories aligned with my own assessment.
I focus on property development projects with a specific set of criteria.
I believe it's better to do due diligence on a small number of loans than spread monies across a random scattering.
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blender
Member of DD Central
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Post by blender on Jan 9, 2020 11:36:56 GMT
My MLA strategy is unchanged. Was reassured that the risk categories aligned with my own assessment. I focus on property development projects with a specific set of criteria. I believe it's better to do due diligence on a small number of loans than spread monies across a random scattering. Yes, that's my preference. I either evaluate and choose my own loans and place a decent sum, or go for defined returns - in normal market conditions. Not in between.
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sl75
Posts: 2,092 
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Post by sl75 on Jan 12, 2020 20:57:54 GMT
Mine was adjusted to take the risk category into account ... "low" and "medium low" have a lower floor rate below which I won't invest at par, whilst "high" and "medium high" have higher floor rates.
... so when the change was introduced, I sold a lot of "high" and "medium high" loans based on the higher floor, and bought lots of "low" and "medium low" loans.
Above the floor rate, I use basically the same approach as before: - larger amounts invested in loans which have a higher coupon [for the same risk category] - larger amounts invested (and/or a lower floor) when there is a discount offered, with the excess holding later offered for sale at par.
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