michaelc
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Post by michaelc on Jun 27, 2023 20:48:50 GMT
I can only tell you that I have lost quite a lot of money due to the collapse and/or fraud of 3 other platforms that were all previously prominently listed on this site. Namely Lendy, Funding Secure, Collateral and to a lesser degree MoneyThing. I've also got a smaller amount of cash locked in Unbolted due to a rogue borrower trying to wriggle out of his obligations on a legal technicality. All these sites had plenty of people on this forum talking up how stable they were. Of course they did - fellow investors didn't want anything to go wrong. MrC who was the admin of these forums told me once in a PM that this place is a "nest of vipers". I had no idea what he meant at the time but I do now. I make no secret of the fact that I have done well from Somo but past is no guarantee of the future. The reasons you list would definitely not make me think the risk of platform failure was anything like good enough and that applies to all social money lending sites where the underlying asset is created by the platform and is not available from any other platform.I don't understand what you mean by the bit you highlighted in bold. In what way do you consider the asset to be "created by the platform"? If I want to buy some stock I go to say Hargreaves Lansdown and buy those shares. I can buy them from a ton of different brokers too. Ditto for etfs, bonds, bonds and lots of other stuff. HL had nothing whatsoever to do with the underlying stock - they just provide a mechanism to allow people like you and I to buy it. On the other hand if I want to buy a slice of Somo loan 2626 for example, I can only go to Somo. They were the ones that did the work and in this case lent the money (that's the only reason its not p2p as some like to harp on about). I can't go to another platform and buy Somo2626. They created "Somo 2626" even if the Buckinghamshire house which underpins it was clearly not created by Somo. In other words, they took the borrower and the house, packaged it all together and sold it as "Somo 2626" which is the thing we as lenders buy into. We don't buy into the house - we are not listed on the deeds together with our micro percentages. Of course not. The _only_ thing we have bought into is "Somo 2626" which was created by Somo. And that is common across the industry - nothing unique to Somo there. But what it means is if the platform goes belly up then so does the asset!
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ilmoro
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'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Jun 27, 2023 20:52:44 GMT
How large would the gap need to be on a platform that is very profitable (so little risk of folding), has no capital losses in its 9 years of existence, has successfully repaid 99.7% of interest due over that time, and only deals in bridging loans (so no development risk)? I can only tell you that I have lost quite a lot of money due to the collapse and/or fraud of 3 other platforms that were all previously prominently listed on this site. Namely Lendy, Funding Secure, Collateral and to a lesser degree MoneyThing. I've also got a smaller amount of cash locked in Unbolted due to a rogue borrower trying to wriggle out of his obligations on a legal technicality. All these sites had plenty of people on this forum talking up how stable they were. Of course they did - fellow investors didn't want anything to go wrong. MrC who was the admin of these forums told me once in a PM that this place is a "nest of vipers". I had no idea what he meant at the time but I do now. I make no secret of the fact that I have done well from Somo but past is no guarantee of the future. The reasons you list would definitely not make me think the risk of platform failure was anything like good enough and that applies to all social money lending sites where the underlying asset is created by the platform and is not available from any other platform.MrC ... I'll get my kettle ... it's black.
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Post by Ace on Jun 27, 2023 21:05:52 GMT
I don't understand what you mean by the bit you highlighted in bold. In what way do you consider the asset to be "created by the platform"? If I want to buy some stock I go to say Hargreaves Lansdown and buy those shares. I can buy them from a ton of different brokers too. Ditto for etfs, bonds, bonds and lots of other stuff. HL had nothing whatsoever to do with the underlying stock - they just provide a mechanism to allow people like you and I to buy it. On the other hand if I want to buy a slice of Somo loan 2626 for example, I can only go to Somo. They were the ones that did the work and in this case lent the money (that's the only reason its not p2p as some like to harp on about). I can't go to another platform and buy Somo2626. They created "Somo 2626" even if the Buckinghamshire house which underpins it was clearly not created by Somo. In other words, they took the borrower and the house, packaged it all together and sold it as "Somo 2626" which is the thing we as lenders buy into. We don't buy into the house - we are not listed on the deeds together with our micro percentages. Of course not. The _only_ thing we have bought into is "Somo 2626" which was created by Somo. And that is common across the industry - nothing unique to Somo there. But what it means is if the platform goes belly up then so does the asset!Thanks for explaining. That (the bold) might be more true in the case of SoMo, since it's "not P2P". But, it's not true for the vast majority of platforms. For those, there's a direct contract between the lender and the borrower. So, where there is security, the lender has a direct charge against that security. That charge still exists regardless of whether the platform exists.
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Greenwood2
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Post by Greenwood2 on Jun 28, 2023 12:25:02 GMT
If I want to buy some stock I go to say Hargreaves Lansdown and buy those shares. I can buy them from a ton of different brokers too. Ditto for etfs, bonds, bonds and lots of other stuff. HL had nothing whatsoever to do with the underlying stock - they just provide a mechanism to allow people like you and I to buy it. On the other hand if I want to buy a slice of Somo loan 2626 for example, I can only go to Somo. They were the ones that did the work and in this case lent the money (that's the only reason its not p2p as some like to harp on about). I can't go to another platform and buy Somo2626. They created "Somo 2626" even if the Buckinghamshire house which underpins it was clearly not created by Somo. In other words, they took the borrower and the house, packaged it all together and sold it as "Somo 2626" which is the thing we as lenders buy into. We don't buy into the house - we are not listed on the deeds together with our micro percentages. Of course not. The _only_ thing we have bought into is "Somo 2626" which was created by Somo. And that is common across the industry - nothing unique to Somo there. But what it means is if the platform goes belly up then so does the asset!Thanks for explaining. That (the bold) might be more true in the case of SoMo, since it's "not P2P". But, it's not true for the vast majority of platforms. For those, there's a direct contract between the lender and the borrower. So, where there is security, the lender has a direct charge against that security. That charge still exists regardless of whether the platform exists. Except administrators tend not to see it that way and take as much from lenders repayments as they can. Edit: I don't see SOMO going down any time soon, but as usual don't invest more than you could afford to lose. I didn't lose much on the Lendy, Collateral, Moneything debacles, I was always rather sceptical of the high returns if they weren't high risk and was surprised how lenders piled in.
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Post by Ace on Jun 28, 2023 12:41:24 GMT
Thanks for explaining. That (the bold) might be more true in the case of SoMo, since it's "not P2P". But, it's not true for the vast majority of platforms. For those, there's a direct contract between the lender and the borrower. So, where there is security, the lender has a direct charge against that security. That charge still exists regardless of whether the platform exists. Except administrators tend not to see it that way and take as much from lenders repayments as they can. Yes, I accept that the administrators can end up eating into the value of the security, but just wanted to point out that it isn't generally true that the lender has no rights to the asset when the platform collapses. I also accept that is a mute point in the cases where it turns out that the platform was a scam or incompetent, and where the FCA have been completely inept in their regulation, as the administrators end up consuming portions of the assets to fund the recoveries. However, I believe that there are many professionally run platforms that don't suffer from the scam or incompetent label, and that SoMo is one of them.
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nick
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Post by nick on Jun 28, 2023 13:21:20 GMT
For me the risk/reward offer my Somo and other P2P loans (I know Somo isn't P2P) just doesn't make sense when you can buy a 1 or 2 year Gilt that is risk free (if held to maturity) and has a yield to maturity of +5.3%.
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Post by Ace on Jun 28, 2023 13:45:05 GMT
For me the risk/reward offer my Somo and other P2P loans (I know Somo isn't P2P) just doesn't make sense when you can buy a 1 or 2 year Gilt that is risk free (if held to maturity) and has a yield to maturity of +5.3%. What would the differential above that rate need to be? That's the question we all have to ask ourselves. We will all have different answers depending on circumstances and attitudes. I've only been investing with Somo since 2020. I did withdraw for a while when I considered the rates too low for me, but I'm back again now that rates have risen. I'm happy enough with my returns there so far. My XIRR is 11.01%. I'd invest more if the funds could be ISA wrapped.
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Greenwood2
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Post by Greenwood2 on Jun 28, 2023 19:44:30 GMT
For me the risk/reward offer my Somo and other P2P loans (I know Somo isn't P2P) just doesn't make sense when you can buy a 1 or 2 year Gilt that is risk free (if held to maturity) and has a yield to maturity of +5.3%. What would the differential above that rate need to be? That's the question we all have to ask ourselves. We will all have different answers depending on circumstances and attitudes. I've only been investing with Somo since 2020. I did withdraw for a while when I considered the rates too low for me, but I'm back again now that rates have risen. I'm happy enough with my returns there so far. My XIRR is 11.01%. I'd invest more if the funds could be ISA wrapped. Been with them since 2016 and I agree an ISA would encourage me to invest more, just ticking over mainly but very happy with the platform and the returns.
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IFISAcava
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Post by IFISAcava on Jun 28, 2023 20:00:59 GMT
For me the risk/reward offer my Somo and other P2P loans (I know Somo isn't P2P) just doesn't make sense when you can buy a 1 or 2 year Gilt that is risk free (if held to maturity) and has a yield to maturity of +5.3%. And when the Gilt is virtually tax-free if you chose the low coupon ones
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Post by overthehill on Jun 28, 2023 20:51:37 GMT
For me the risk/reward offer my Somo and other P2P loans (I know Somo isn't P2P) just doesn't make sense when you can buy a 1 or 2 year Gilt that is risk free (if held to maturity) and has a yield to maturity of +5.3%. And when the Gilt is virtually tax-free if you chose the low coupon ones
The grammar is not great in that statement. I don't invest in gilts, what is it you're saying? Doesn't low coupons infer low interest/yield ?
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IFISAcava
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Post by IFISAcava on Jun 28, 2023 21:56:15 GMT
And when the Gilt is virtually tax-free if you chose the low coupon ones
The grammar is not great in that statement. I don't invest in gilts, what is it you're saying? Doesn't low coupons infer low interest/yield ?
it followed on from the quoted post. i.e. The risk/reward offer by Somo just doesn't make sense for the reasons stated, and when the (yield to maturity on a) Gilt is virtually tax-free if you chose the low coupon ones. Gilts bought now have a coupon and if held to maturity a defined capital gain. Together that is the yield to maturity, currently 5.3% or so. The coupon is income and taxed accordingly. For gilts, the capital gain is tax free. So for a low coupon gilt (there are many at 0.125% or 0.25%) the capital gain is the vast majority of the YTM. So there is an after tax return of over 5% guaranteed if held to maturity (6 months to 2 years). I have recently bought a load of these short dated, low coupon gilts. Basically it is a guaranteed 5.2% after tax (as a higher rate payer I'd never get that outside an ISA, and my ISAs are full of other stuff).
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michaelc
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Post by michaelc on Jun 28, 2023 22:54:01 GMT
Yes, the risk/reward definitely does not make sense but I think that applies to most all platforms at the moment.
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Post by overthehill on Jun 29, 2023 8:09:50 GMT
The grammar is not great in that statement. I don't invest in gilts, what is it you're saying? Doesn't low coupons infer low interest/yield ?
it followed on from the quoted post. i.e. The risk/reward offer by Somo just doesn't make sense for the reasons stated, and when the (yield to maturity on a) Gilt is virtually tax-free if you chose the low coupon ones. Gilts bought now have a coupon and if held to maturity a defined capital gain. Together that is the yield to maturity, currently 5.3% or so. The coupon is income and taxed accordingly. For gilts, the capital gain is tax free. So for a low coupon gilt (there are many at 0.125% or 0.25%) the capital gain is the vast majority of the YTM. So there is an after tax return of over 5% guaranteed if held to maturity (6 months to 2 years). I have recently bought a load of these short dated, low coupon gilts. Basically it is a guaranteed 5.2% after tax (as a higher rate payer I'd never get that outside an ISA, and my ISAs are full of other stuff).
Got it. I thought gilt/bond yields were all paid as coupon income and the maturity value was the same as the investment amount.
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Post by Ace on Jun 29, 2023 8:35:47 GMT
it followed on from the quoted post. i.e. The risk/reward offer by Somo just doesn't make sense for the reasons stated, and when the (yield to maturity on a) Gilt is virtually tax-free if you chose the low coupon ones. Gilts bought now have a coupon and if held to maturity a defined capital gain. Together that is the yield to maturity, currently 5.3% or so. The coupon is income and taxed accordingly. For gilts, the capital gain is tax free. So for a low coupon gilt (there are many at 0.125% or 0.25%) the capital gain is the vast majority of the YTM. So there is an after tax return of over 5% guaranteed if held to maturity (6 months to 2 years). I have recently bought a load of these short dated, low coupon gilts. Basically it is a guaranteed 5.2% after tax (as a higher rate payer I'd never get that outside an ISA, and my ISAs are full of other stuff).
Got it. I thought gilt/bond yields were all paid as coupon income and the maturity value was the same as the investment amount.
That's right, but if you buy them at a discount and hold to maturity there's a capital gain. For gilts, that capital gain is tax free.
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ilmoro
Member of DD Central
'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Jun 29, 2023 9:54:03 GMT
Except administrators tend not to see it that way and take as much from lenders repayments as they can. Yes, I accept that the administrators can end up eating into the value of the security, but just wanted to point out that it isn't generally true that the lender has no rights to the asset when the platform collapses. I also accept that is a mute point in the cases where it turns out that the platform was a scam or incompetent, and where the FCA have been completely inept in their regulation, as the administrators end up consuming portions of the assets to fund the recoveries. However, I believe that there are many professionally run platforms that don't suffer from the scam or incompetent label, and that SoMo is one of them. Something of a grey area ... the issue is that the security is held on behalf of lenders by an agent and under the security docs that agent, & potentially only that agent, has the power to enforce. The issue so far has been that the security agent has no real means to manage the recovery without the platform. Thats why all the collapsed platforms have ended up in Court to derive a mechanism for the costs of managing the recovery to be covered. So while lenders always have rights to the asset, the practicalities of enforcing those rights is complex & perhaps prohibitively expensive.
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