Post by get2jaime on Dec 15, 2022 12:42:20 GMT
Over the last year we have finally seen sharp and substantial rises in bank interest rates after well over ten years of them languishing at near zero levels. This has led to the Access Accounts and our other products becoming less competitive than they were versus rates offered for some bank savings products. We recently raised the rates on the Access Accounts and initially saw healthy net inflows of capital. However, after continued bank interest rate rises, retail investors were withdrawing capital on a net weekly basis.
In our last e-mail, we said that we would consider ways to provide our investors with immediate access to the higher interest rates provided by our more recent lending activity. Whilst these more recently originated, higher interest rate loans (often 7% or more) are available today in the Manual Lending Account, we know that manually selecting loans for investment is not for everyone and have not seen high enough levels of demand for those loans.
We also looked at the potential for a new higher interest automated account, or an easy auto-invest process applied to the Manual Lending Account. We also polled our investors to add this feedback to our thinking on the retail investment part of our business. Unfortunately, we did not see substantial demand for a new higher interest rate account as a result of that poll. We also reviewed the wider market and saw that there were no substantial levels of net new investment taking place elsewhere in the peer-to-peer space.
As a result, we have reluctantly made the decision to close the retail platform and conduct a solvent run-off of the retail loan book. Assetz Capital will become a 100% institutionally funded lender from now onwards in order to continue achieving its aim of making finance accessible to borrowers and providing growing and valuable support to the house building and care industries. This is not much of a change in reality as around 80% of all lending has been institutionally funded since early 2020, since the commencement of the pandemic.
We have notified the Financial Conduct Authority of our intentions. Please note that Assetz Capital will continue to be authorised and regulated by the Financial Conduct Authority during the run-off.
We were originally founded to support retail access to fair returns over a period of relatively poor returns elsewhere. We have always operated on a “retail first” basis and have repeatedly said that we would always do that whilst investors wanted what we produced. With almost no demand today from retail investors for the products that we can offer in the face of higher interest rates and the wider economic conditions at present, we must move on in order to effectively support the continued growth of the small housebuilder and to give SME businesses access to capital in the form of property secured lending.
It has been really rewarding to have had our retail investors earn £170m+ gross interest over the last 10 years and we are glad to have played a part in helping people through that low-income period.
Our other business aims remain just as strong, even stronger given larger expected funding lines into 2023.
For our retail investors there will be many questions about what does this change mean for you?
We provide further details in our blog here and also below, but in summary:
The platform will continue to operate for existing investors and you will be able to access information regarding your account and withdraw available uninvested funds from your cash account in much the same way as you do at present.
We will continue to monitor and manage your loans, collect interest and return capital over time as loans redeem (subject to the other information provided in this message).
We will continue to pursue recoveries on your behalf on loans which require this, including any loans which fall into recoveries in the future, with the aim of achieving the best possible outcomes for lenders under the circumstances.
We remain committed to providing investors with an appropriate level of service throughout the run-off period.
However, please note that:
No new money should be deposited on the platform and any uninvested cash in your cash account should be withdrawn as quickly as possible – this cash is not interest-bearing and could be serving you better elsewhere.
Spare cash in any investment accounts will be moved out to your cash account automatically, subject to the detail below.
As loans are repaid or interest is received the cash will be moved to your cash account for withdrawal, subject to the detail on each investment account below and specifically the Access Accounts will continue to reinvest all loan redemptions and spare cash into the funding of ongoing development facilities for a period, as described below.
No new ISAs should be set up. Customers with an existing ISA should take care to preserve the tax status of their ISA by arranging a transfer out rather than withdrawing funds to their bank account as withdrawal may cause the loss of the ISA tax-free status.
All buy and sell orders on the Manual Lending Account have been deleted and no trading is now possible.
The Access Accounts have ceased to trade and a detailed explanation is below. The recently enabled withdrawal queue has been removed from the Access Accounts and all investors will receive pro-rata capital per loan redemption to their cash account once that process starts.
Capital will be returned to you as quickly as possible and interest will be provided in the usual way.
A lender fee will be charged again, to cover costs of the running off of the loan book without the benefit of any new lending income from retail funds.
Each investment account also has its own detailed explanation below and should be read in conjunction with the information above, the blog and the FAQs published on our website.
Assetz Capital remains regulated and will continue to manage any complaints in the same way as it does at present. Our Complaints page may be found here.
Access Accounts
As advised on 28/11/2022, the Access Accounts are in Non-Normal Market Conditions as defined here.
We recently gated withdrawals from the Access Accounts in order to maintain capital levels for a period of time. Not doing so could have meant that existing loans within the accounts that had future funding commitments, such as development loans with monthly draw down requirements, may not have been in a position to be funded and that could have led to significant losses for lenders if in-flight developments were to fail. The accounts have to be able to service future funding requirements of investors’ existing development loans as a development can lose substantial value if funding ceases mid-development. This is something we must avoid as investors, as well as borrowers, may see material losses as a result. In order to avoid that situation, we took the difficult decision to cease withdrawals from the Access Accounts to ensure that all existing development loans will be fully funded to completion. These changes to withdrawals are envisaged and described in our terms and conditions and the published account operation rules.
We had been operating a queue system for withdrawals since we gated the accounts. Now that we have made the decision today to cease retail investment as a platform, withdrawal requests from the Access Accounts will no longer be processed and withdrawals will commence again automatically once all existing development loans are fully funded. We expect that process to commence in a number of months’ time and cannot provide more detailed guidance on timing today due to the nature of that lending. Withdrawals to your cash account will be automatic and pro-rata to your holding in each individual loan that redeems, once withdrawals commence again.
For those of you with holdings within the 30 Day Access Account and the 90 Day Access Account, notice is served as of today and once the notice period expires you will be invested within the Quick Access Account ready for automatic withdrawal. The target rate of the QAA will be 4% pa. We do not expect withdrawals to commence before these notice periods expire so everybody would be expected to be treated in the same way.
We expect Access Account investors will be able to withdraw capital from redemptions starting in approximately six months’ time based on present estimates and will keep investors informed. Interest will continue to be paid to your cash account monthly.
MLA and other Older Investment Accounts
No new loans will be provided within the manual lending account and so further investment will not be possible. The MLA marketplace will also cease to operate as of today meaning you cannot trade out of or into other loans. Instead, once loans redeem or repay capital partly or pay interest the cash will be transferred to your cash account for withdrawal.
We expect MLA investors will be able to withdraw capital from this month onwards. Interest will be received from day to day as it does at present.
Lender Fees
The ceasing of new retail lending means a significant drop in our income for the retail part of the business. We are in the process of reducing overheads to match this new permanent state and in the meantime, have calculated the following Lender Fees to be applied to cover the anticipated costs of adjusting the business to a run-off footing then managing the loan book through run off and returning capital to investors.
Through to end of June 2023 - 2.9% pa of performing loans
July to December 2023 - 1.4% pa of performing loans
January 2024 onward - 0.9% pa of performing loans
(This equates to an average fee level of 2.15% for the first 12 months and a 5 year effective fee of 1.15% pa)
These are estimated fees and subject to review over time. They would be applied to interest received by investors (i.e.: on performing loans only), commencing once software updates are implemented.
Please see more detailed information in the FAQs of our blog.
Other Matters
As a direct result of ceasing new investment across the platform (in any account), the following changes will be made:
The online Q&A on individual loans will cease (but the support desk will continue as well as regular portfolio updates)
Detailed and high frequency lender updates on individual loans and detailed stage drawdown credit reports on individual loans will cease. Less frequent and briefer event driven loan updates will be provided.
The circumstances in which a lender vote is issued will be reduced
Capital value calculations will cease as loan trading has ceased
Other simplifications may follow in due course in order to reasonably control costs which might otherwise have to be passed on as part of a lender fee.
We have set up a page which includes all of this initial information and which will be updated over time during the run-off. This page can be found here.
We appreciate that this will not be welcome news, particularly if you were still actively investing with us. However, it is not possible for us to continue to operate in the retail space when our offering is not sufficiently attractive, in this sudden high interest rate environment, to attract sufficient investment to allow us to continue to originate loans for the retail platform economically. It is with regret that we have had to make the decision to perform a solvent run-off of the retail book and return cash to investors as quickly as is practical. We remain committed to servicing our borrowers and returning funds to our retail investors as swiftly as possible, subject to everything that we have explained above.
Thank you for your understanding and for being a customer of Assetz Capital. Some of you have been with us nearly ten years and it is appreciated.
If you have any questions or queries please contact our Investor Team on 0800 470 0430 (Option 1), via Live Chat or email enquiries@assetzcapital.co.uk
Kind Regards,
Stuart Law
CEO & Co-Founder of Assetz Capital
As anticipated then!?!
In our last e-mail, we said that we would consider ways to provide our investors with immediate access to the higher interest rates provided by our more recent lending activity. Whilst these more recently originated, higher interest rate loans (often 7% or more) are available today in the Manual Lending Account, we know that manually selecting loans for investment is not for everyone and have not seen high enough levels of demand for those loans.
We also looked at the potential for a new higher interest automated account, or an easy auto-invest process applied to the Manual Lending Account. We also polled our investors to add this feedback to our thinking on the retail investment part of our business. Unfortunately, we did not see substantial demand for a new higher interest rate account as a result of that poll. We also reviewed the wider market and saw that there were no substantial levels of net new investment taking place elsewhere in the peer-to-peer space.
As a result, we have reluctantly made the decision to close the retail platform and conduct a solvent run-off of the retail loan book. Assetz Capital will become a 100% institutionally funded lender from now onwards in order to continue achieving its aim of making finance accessible to borrowers and providing growing and valuable support to the house building and care industries. This is not much of a change in reality as around 80% of all lending has been institutionally funded since early 2020, since the commencement of the pandemic.
We have notified the Financial Conduct Authority of our intentions. Please note that Assetz Capital will continue to be authorised and regulated by the Financial Conduct Authority during the run-off.
We were originally founded to support retail access to fair returns over a period of relatively poor returns elsewhere. We have always operated on a “retail first” basis and have repeatedly said that we would always do that whilst investors wanted what we produced. With almost no demand today from retail investors for the products that we can offer in the face of higher interest rates and the wider economic conditions at present, we must move on in order to effectively support the continued growth of the small housebuilder and to give SME businesses access to capital in the form of property secured lending.
It has been really rewarding to have had our retail investors earn £170m+ gross interest over the last 10 years and we are glad to have played a part in helping people through that low-income period.
Our other business aims remain just as strong, even stronger given larger expected funding lines into 2023.
For our retail investors there will be many questions about what does this change mean for you?
We provide further details in our blog here and also below, but in summary:
The platform will continue to operate for existing investors and you will be able to access information regarding your account and withdraw available uninvested funds from your cash account in much the same way as you do at present.
We will continue to monitor and manage your loans, collect interest and return capital over time as loans redeem (subject to the other information provided in this message).
We will continue to pursue recoveries on your behalf on loans which require this, including any loans which fall into recoveries in the future, with the aim of achieving the best possible outcomes for lenders under the circumstances.
We remain committed to providing investors with an appropriate level of service throughout the run-off period.
However, please note that:
No new money should be deposited on the platform and any uninvested cash in your cash account should be withdrawn as quickly as possible – this cash is not interest-bearing and could be serving you better elsewhere.
Spare cash in any investment accounts will be moved out to your cash account automatically, subject to the detail below.
As loans are repaid or interest is received the cash will be moved to your cash account for withdrawal, subject to the detail on each investment account below and specifically the Access Accounts will continue to reinvest all loan redemptions and spare cash into the funding of ongoing development facilities for a period, as described below.
No new ISAs should be set up. Customers with an existing ISA should take care to preserve the tax status of their ISA by arranging a transfer out rather than withdrawing funds to their bank account as withdrawal may cause the loss of the ISA tax-free status.
All buy and sell orders on the Manual Lending Account have been deleted and no trading is now possible.
The Access Accounts have ceased to trade and a detailed explanation is below. The recently enabled withdrawal queue has been removed from the Access Accounts and all investors will receive pro-rata capital per loan redemption to their cash account once that process starts.
Capital will be returned to you as quickly as possible and interest will be provided in the usual way.
A lender fee will be charged again, to cover costs of the running off of the loan book without the benefit of any new lending income from retail funds.
Each investment account also has its own detailed explanation below and should be read in conjunction with the information above, the blog and the FAQs published on our website.
Assetz Capital remains regulated and will continue to manage any complaints in the same way as it does at present. Our Complaints page may be found here.
Access Accounts
As advised on 28/11/2022, the Access Accounts are in Non-Normal Market Conditions as defined here.
We recently gated withdrawals from the Access Accounts in order to maintain capital levels for a period of time. Not doing so could have meant that existing loans within the accounts that had future funding commitments, such as development loans with monthly draw down requirements, may not have been in a position to be funded and that could have led to significant losses for lenders if in-flight developments were to fail. The accounts have to be able to service future funding requirements of investors’ existing development loans as a development can lose substantial value if funding ceases mid-development. This is something we must avoid as investors, as well as borrowers, may see material losses as a result. In order to avoid that situation, we took the difficult decision to cease withdrawals from the Access Accounts to ensure that all existing development loans will be fully funded to completion. These changes to withdrawals are envisaged and described in our terms and conditions and the published account operation rules.
We had been operating a queue system for withdrawals since we gated the accounts. Now that we have made the decision today to cease retail investment as a platform, withdrawal requests from the Access Accounts will no longer be processed and withdrawals will commence again automatically once all existing development loans are fully funded. We expect that process to commence in a number of months’ time and cannot provide more detailed guidance on timing today due to the nature of that lending. Withdrawals to your cash account will be automatic and pro-rata to your holding in each individual loan that redeems, once withdrawals commence again.
For those of you with holdings within the 30 Day Access Account and the 90 Day Access Account, notice is served as of today and once the notice period expires you will be invested within the Quick Access Account ready for automatic withdrawal. The target rate of the QAA will be 4% pa. We do not expect withdrawals to commence before these notice periods expire so everybody would be expected to be treated in the same way.
We expect Access Account investors will be able to withdraw capital from redemptions starting in approximately six months’ time based on present estimates and will keep investors informed. Interest will continue to be paid to your cash account monthly.
MLA and other Older Investment Accounts
No new loans will be provided within the manual lending account and so further investment will not be possible. The MLA marketplace will also cease to operate as of today meaning you cannot trade out of or into other loans. Instead, once loans redeem or repay capital partly or pay interest the cash will be transferred to your cash account for withdrawal.
We expect MLA investors will be able to withdraw capital from this month onwards. Interest will be received from day to day as it does at present.
Lender Fees
The ceasing of new retail lending means a significant drop in our income for the retail part of the business. We are in the process of reducing overheads to match this new permanent state and in the meantime, have calculated the following Lender Fees to be applied to cover the anticipated costs of adjusting the business to a run-off footing then managing the loan book through run off and returning capital to investors.
Through to end of June 2023 - 2.9% pa of performing loans
July to December 2023 - 1.4% pa of performing loans
January 2024 onward - 0.9% pa of performing loans
(This equates to an average fee level of 2.15% for the first 12 months and a 5 year effective fee of 1.15% pa)
These are estimated fees and subject to review over time. They would be applied to interest received by investors (i.e.: on performing loans only), commencing once software updates are implemented.
Please see more detailed information in the FAQs of our blog.
Other Matters
As a direct result of ceasing new investment across the platform (in any account), the following changes will be made:
The online Q&A on individual loans will cease (but the support desk will continue as well as regular portfolio updates)
Detailed and high frequency lender updates on individual loans and detailed stage drawdown credit reports on individual loans will cease. Less frequent and briefer event driven loan updates will be provided.
The circumstances in which a lender vote is issued will be reduced
Capital value calculations will cease as loan trading has ceased
Other simplifications may follow in due course in order to reasonably control costs which might otherwise have to be passed on as part of a lender fee.
We have set up a page which includes all of this initial information and which will be updated over time during the run-off. This page can be found here.
We appreciate that this will not be welcome news, particularly if you were still actively investing with us. However, it is not possible for us to continue to operate in the retail space when our offering is not sufficiently attractive, in this sudden high interest rate environment, to attract sufficient investment to allow us to continue to originate loans for the retail platform economically. It is with regret that we have had to make the decision to perform a solvent run-off of the retail book and return cash to investors as quickly as is practical. We remain committed to servicing our borrowers and returning funds to our retail investors as swiftly as possible, subject to everything that we have explained above.
Thank you for your understanding and for being a customer of Assetz Capital. Some of you have been with us nearly ten years and it is appreciated.
If you have any questions or queries please contact our Investor Team on 0800 470 0430 (Option 1), via Live Chat or email enquiries@assetzcapital.co.uk
Kind Regards,
Stuart Law
CEO & Co-Founder of Assetz Capital
As anticipated then!?!