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Post by Deleted on Jan 17, 2015 19:02:38 GMT
Hi,
Just registered today on AC and I have some basic questions please?
1) There seem to be very few loans that can be invested in? Is that normal/usual?
2) If I want to invest say £1,000, how can I diversify/reduce the risk with so few loans?
3) If those loans have already been granted and repayments already happening, why can we still buy some of those loans? Or are those basically sold by previous investors/secondary market?
4) If the only loans available are basically resold, how do we get access to loans before they are granted? In which priority the orders are taken?
5) If all loans granted by AC are secured loans (against existing assets), has anybody lost any money so far (principal, and/or interests)?
6) Does AC publishes stats about default, late payment of interests etc? I haven't seen any.
7) If AC is safer than other P2P loan platforms, and paying higher interest rates to investors (9 - 10%), without charging fees, what's the catch? Why would I invest elsewhere, on unsecure loans?
8) Are there any fees when selling the loans?
9) Are the monthly interests pro-rated based on date of purchasing/selling?
Thanks!
S.
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Post by mrclondon on Jan 17, 2015 19:52:04 GMT
1) 2) and 3) Whilst there are currently only 10 loans that have immediate availability, the way AC works is you set an investment target for each loan, and when someone sells their units they are divided up amongst lenders with an unfulfilled target and cash available, and only if there are any left over do they appear on the loan list. I've been allocated chunks of several loans over the last 7 days that never reached the "Units Available" list.
4) Upcoming loans is fairly quiet at present (partly due to the new website "hiding" part of the loan pipeline !) , but historically there has been around one new loan a week. Again setting an investment target on these loans is how you get a share of the loan when it draws down.
5) and 7) Short answer no losses of any sort to date. The platform has been trading less than 2 years. There are a few "distressed" loans, but it can take many months or years for it to become clear whether a loss has to be declared. The performance of this and other p2p platforms will only become clear in 5 to 10 years time.
6) Don't think so.
8) No
9) Yes
Diversification is the key to p2p investing, both across many loans on a platform and across platforms. (But that equally applies to all forms of investing of course). Some people are not keen on relying on property as security in case the next property crash (which is possibly already starting) wipes out too much of the security value. They might prefer unsecured personal loans backed with a provision fund at say 6%, on their personal expectation that this will yield more than a property secured loan at 10% once default losses have been deducted. This is crystal ball stuff, hence the only sensible strategy is diversification , diversification and diversification.
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bg
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Post by bg on Jan 17, 2015 20:26:03 GMT
Hi Sebtomato,
Basically at the moment there is an excess of demand over supply (i.e. not enough loans) primarily due to the Xmas period (companies don't borrow and staff at AC on holiday). This applies to other P2P sites that lend to businesses (such as FC). This means there are very few loans available to invest in as people are holding onto the loans available.
The way AC works is that every loan is underwritten initially and when it draws down becomes available to invest in. Basically the loans you can see with units available now are some of the larger and less popular loans that the underwriters are still selling down. More loans will become available in the coming weeks which will alleviate the situation somewhat (as I imagine investors will try and diversify by selling out of some of the loans they currently hold). I suggest you set a target holding amount of (say) £100 for a number of loans (certainly more than 10, the more the quicker will will get invested) you are interested in. As loan units become available the system will automatically buy them for you. As mrclondon said, at the moment most loan units are snapped up instantly by the system when they become available so you rarely see them as 'units available' just now. Once you start to acquire units you can tweak your holdings as you desire.
Nobody yet has lost money on AC but there are a number of bridging loans that have run over term and are awaiting refinance. I would imagine everyone will get their money back eventually just it may take while (if the asset has to be sold).
I wouldn't say AC pays higher interest rates. SS has a fixed 12% on all loans and you can pick up loans on FC paying 14% (albeit unsecured) when liquidity is a bit better. They do charge fees, just to the borrower (whereas FC charges both borrower and investor). I wouldn't say theres a catch, just sometimes due to the legal work it can be frustrating waiting for a loan to draw down that you are interested in (where as on FC they draw down quickly as they are unsecured - but have regular defaults).
There are no fees on buying or selling loans. Having a liquid secondary market is important to investors and brings more money into the platform.
interest is pro-rata on buying and selling. Unlike other platforms the purchaser does not pay the seller for the accrued interest to date. instead the seller receives the interest from the borrower on the next repayment date.
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Post by Deleted on Jan 17, 2015 20:29:36 GMT
Thank you!
So I can basically bid on any of the active loans, regardless on whether units are available right now or not.
If units are not available, my bid will be submitted when people are selling their share.
How do we know if people are selling / have been selling units recently from specific loans (and therefore that it's worth bidding on those)?
How does the system prioritise my bids? I have more bids than the cash available. Is it done by interest rate expected to be paid (highest first?)
Thanks!
S.
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bg
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Post by bg on Jan 17, 2015 20:37:43 GMT
Yes, that is correct. You can set a target holding for any (or all) of the loans.
You don't know what the activity is going through (except for your own). I would recommend however setting targets on as many loans as you are interested in. It doesn't matter if you have £1000 to invest but set targets to hold £50k. It will just buy the first units that become available (bear in mind a lot of the loans will have a number of people looking to invest so when someone does sell it will split the sales between all the people looking to buy).
It doesn't prioritise your bids. It will just buy (up to your target) the first loans that are put up for sale. So if you have £1000 in your account and targets of £1000 for 100 loans, it would try and buy £1000 of the first loan put up for sale.
As I said, I would just set a load of targets. With the market like this you can probably sell out of anything you get (say if you want to diversify into something else) within a few hours (probably minutes) so I wouldn't worry about getting a larger holding in anything. Even the loans that currently have large amounts of units available you can probably sell out of within a day or so (due to the way the selling also works).
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Post by pepperpot on Jan 17, 2015 21:13:05 GMT
Hi @sebtomato. You just need to get started to see it in action. Starting from scratch with the level of investment you mentioned above, I'd set sensible targets on at least 50 loans of say £50 each, and pop a couple of hundred in your MLIA account. When you start to acquire units (anything from £1 upwards) you will know how much and how often to top up your available cash. Then as bg says it should be easy to spread your holdings by reducing your targets to repopulate your available cash when you're fully invested to get more diversification, diversification, diversification.  The other thing to bear in mind is the larger the loan the more likely you are to snag some. It would be interesting to see a how quickly a fresh account can get spread so please keep us posted. |
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sl75
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Post by sl75 on Jan 17, 2015 22:06:45 GMT
How do we know if people are selling / have been selling units recently from specific loans (and therefore that it's worth bidding on those)? The only "cost" is in the time it physically takes you to set the targets. No funds are exclusively reserved for that target, so you're not "wasting" any other resource - it'll just buy loan units as and when they become available, and until either the target is reached or you (temporarily) run out of money. When you receive a repayment from any of your loans, it'll then seek to re-invest those funds (immediately if loan units you've targeted are immediately available, otherwise often the same day).
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Post by Deleted on Jan 17, 2015 22:10:49 GMT
Thanks Pepperpot.
So you think that even if I had 50 bids x £50, I would be still unlikely to manage to invest my full £1,000 from day one, and therefore it's better to add money progressively to the account? If so, there is clearly a massive market imbalance.
If I am putting a £50 bid against an active loan with no units available, say offering a 15% interest, how likely am I to actually get that bid fulfilled quickly?
Could I be getting any amount between £1 and £50, depending on what is sold by other people, and how many are buying at the same time?
How often the matching market engine runs? Is it real time, every hour, every day?
Thanks!
S.
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agent69
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Post by agent69 on Jan 17, 2015 22:11:16 GMT
8) Are there any fees when selling the loans? No fees to sell. but bear in mind you can only sell if somebody wants to buy from you. So if you buy a loan with £300k available it may be difficult to sell (unless the ability to mark loan parts down returns). On the other hand if you pick up something with only a small amount available it will probably shift straight away when you decide to sell.
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agent69
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Post by agent69 on Jan 17, 2015 22:19:00 GMT
How often the matching market engine runs? Is it real time, every hour, every day? If you offer something for sale that somebody else wants it will go in about 30 seconds
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mikes1531
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Post by mikes1531 on Jan 17, 2015 23:00:37 GMT
So if you have £1000 in your account and targets of £1000 for 100 loans, it would try and buy £1000 of the first loan put up for sale. @sebtomato: The above is true, but in my experience nearly all purchases seem to be less than £50 worth of a loan, and many (most?) are for less than a tenner. That's the reason for the recommendation to set targets on every loan you are willing to have a part of. With the market like this you can probably sell out of anything you get (say if you want to diversify into something else) within a few hours (probably minutes) so I wouldn't worry about getting a larger holding in anything. Even the loans that currently have large amounts of units available you can probably sell out of within a day or so (due to the way the selling also works). I agree that selling parts of loans with no other units available typically happens within minutes. But I don't agree with the last sentence suggesting that parts in loans with large amounts available are likely to sell within a day or two. AIUI, when someone buys a part, the person who gets to sell is chosen at random. So if you offer a £100 part for sale and there are £2000 other parts for sale, then when someone decides to buy £100 worth you have a 1-in-20 chance of being the chosen seller. If there are £200k of parts available, your chance of being the seller is 1-in-2000. So it is likely to take a lot of buyers before your number comes up and your part is the one that's sold. There's another factor to involved... A loan with no parts available for sale is likely to have a number of investors who have targets set to try to buy parts, and that is why any parts offered for sale tend to sell very quickly. A loan with lots of parts available, however, has no investors with cash in their accounts trying to buy it, since any buying requests would be dealt with immediately. So when you offer parts in one of those loans for sale, nothing can happen until a new buyer comes along. And since there are parts still for sale, anyone who wanted parts in that loan will have had an opportunity to buy all they want -- or had the money for -- before you decided to sell, so there's virtually no pent-up, unfulfilled, demand for that loan, and that also will make selling slower.
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bg
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Post by bg on Jan 17, 2015 23:15:16 GMT
With the market like this you can probably sell out of anything you get (say if you want to diversify into something else) within a few hours (probably minutes) so I wouldn't worry about getting a larger holding in anything. Even the loans that currently have large amounts of units available you can probably sell out of within a day or so (due to the way the selling also works). I agree that selling parts of loans with no other units available typically happens within minutes. But I don't agree with the last sentence suggesting that parts in loans with large amounts available are likely to sell within a day or two. AIUI, when someone buys a part, the person who gets to sell is chosen at random. So if you offer a £100 part for sale and there are £2000 other parts for sale, then when someone decides to buy £100 worth you have a 1-in-20 chance of being the chosen seller. If there are £200k of parts available, your chance of being the seller is 1-in-2000. So it is likely to take a lot of buyers before your number comes up and your part is the one that's sold. This isn't right. It splits the amount between the number of sellers (it doesn't apportion the actual amount). For example, if there is £300k up for sale on a loan from one seller and you put £100 up for sale....if someone buys £200 of that loan then you will sell your £100 (and the other guy will also sell £100). For this reason it's actually much easier to sell down smaller (up to a few grand say) of the loans that have larger availability than people think. Typically the loans with a lot for sale will be a handful (maybe even one) underwriters selling down so you will sell quite quickly. If if you aren't sure, try buying £100 of the care home that's available and put it straight up for sale. I would wager you would have sold it within 24 hours despite there being £350k sitting there.
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mikes1531
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Post by mikes1531 on Jan 17, 2015 23:39:03 GMT
I agree that selling parts of loans with no other units available typically happens within minutes. But I don't agree with the last sentence suggesting that parts in loans with large amounts available are likely to sell within a day or two. AIUI, when someone buys a part, the person who gets to sell is chosen at random. So if you offer a £100 part for sale and there are £2000 other parts for sale, then when someone decides to buy £100 worth you have a 1-in-20 chance of being the chosen seller. If there are £200k of parts available, your chance of being the seller is 1-in-2000. So it is likely to take a lot of buyers before your number comes up and your part is the one that's sold. This isn't right. It splits the amount between the number of sellers (it doesn't apportion the actual amount). For example, if there is £300k up for sale on a loan from one seller and you put £100 up for sale....if someone buys £200 of that loan then you will sell your £100 (and the other guy will also sell £100). For this reason it's actually much easier to sell down smaller (up to a few grand say) of the loans that have larger availability than people think. Typically the loans with a lot for sale will be a handful (maybe even one) underwriters selling down so you will sell quite quickly. If if you aren't sure, try buying £100 of the care home that's available and put it straight up for sale. I would wager you would have sold it within 24 hours despite there being £350k sitting there. I suppose it's all down to interpretation of what we've been told about how the random selection is made. I was under the impression that it was units for sale that were randomised, whereas bg believes it is sellers who are randomised. Other than receiving clarification of this from chris, I don't see how we can know exactly how the random selection process is programmed. Having said that, though, there have been times when I've offered parts for sale from loans with large availability and been surprised that I sold my parts as quickly as I did -- but not as quickly as 24 hours. I don't have any records, but when I did sell some of the earlier care home (#101), IIRC it took a couple of weeks or so to sell down my excess holding. But things may move faster now.
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Post by Ton ⓉⓞⓃ on Jan 18, 2015 0:27:14 GMT
My vague understanding is that u/w's can sell as an u/w and also as a retail lender, i.e. double their appearance in the market. Also there's the aspect that buys are, I believe, filled from the bottom up; in that if you've buying £100 of a loan where there are many units available the system looks for the smallest units for sale first; hoovering up all the £10s first say then perhaps any £20s etc etc til it fills the order. So it's random but not completely. Finally when the long awaited "selling at a markdown" is re-introduced this will add to the complexity of how it all works (The last I heard was January was the planned date for the return of Markdown's)
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pikestaff
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Post by pikestaff on Jan 18, 2015 7:23:29 GMT
I agree that selling parts of loans with no other units available typically happens within minutes. But I don't agree with the last sentence suggesting that parts in loans with large amounts available are likely to sell within a day or two. AIUI, when someone buys a part, the person who gets to sell is chosen at random. So if you offer a £100 part for sale and there are £2000 other parts for sale, then when someone decides to buy £100 worth you have a 1-in-20 chance of being the chosen seller. If there are £200k of parts available, your chance of being the seller is 1-in-2000. So it is likely to take a lot of buyers before your number comes up and your part is the one that's sold. This isn't right. It splits the amount between the number of sellers (it doesn't apportion the actual amount). For example, if there is £300k up for sale on a loan from one seller and you put £100 up for sale....if someone buys £200 of that loan then you will sell your £100 (and the other guy will also sell £100). For this reason it's actually much easier to sell down smaller (up to a few grand say) of the loans that have larger availability than people think. Typically the loans with a lot for sale will be a handful (maybe even one) underwriters selling down so you will sell quite quickly. If if you aren't sure, try buying £100 of the care home that's available and put it straight up for sale. I would wager you would have sold it within 24 hours despite there being £350k sitting there. Hmm. My understanding was broadly the same as mikes1531's, but in the interest of science I've just put £100 of my holding in the care home up for sale. We shall see...
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