bugs4me
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Post by bugs4me on Jan 1, 2023 10:00:12 GMT
This is an interesting exercise and thank you for kicking everything off Ace. Everyone involved in P2P should keep XIRR figures - just a personal view.
I consider myself fortunate as I was involved with P2P back in 2011 and starting exiting some 5 years ago - gut feeling and all that. Things just didn't seem right.
Anyway - my figures
Zopa 4.51% Ratesetter 5.32% Assetz 11.95% Funding Secure** 4.67% Wellesley 7.91% Lendy** 3.90% Moneything** 9.90% Collateral** -65.04% Assetz2 4.61% BMason 3.93% Kufflink 6.92% Loanpad 5.90%
I've exited everything apart from the ** which contain more than a couple zombie loans. Those I have written down to 1p so if by some miracle there are further pennies floating my way it will amend the platform return although being realistic I'm certainly not holding my breath. Unfortunately my timing was poor with Collateral. Assetz2 refers to the old AA's accounts which I fully exited - they are effectively dead duck accounts in my book however AC towers presents it.
Overall my XIRR equates to 5.69% although no doubt if I had 'hung around' it would be far lower. Was it all worth it? - I'm in two minds. In the early days the amount of DD required was minimal but as the platforms became increasingly opaque the DD work required, often leading to a several dead-ends, then answer today would be a big no. So P2P is not for me today especially as the trust factor has gone and there are several superior opportunities elsewhere.
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angrysaveruk
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Post by angrysaveruk on Jan 1, 2023 10:35:16 GMT
Impressive Returns, although I would say the risk of platforms closing down over the next 2 years is very high. Are you exiting yourself now? Zopa was a great platform early on but later on the rates offered were a bit low - probably the most successful P2P platform of all time.
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bugs4me
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Post by bugs4me on Jan 1, 2023 10:48:21 GMT
Impressive Returns, although I would say the risk of platforms closing down over the next 2 years is very high. Are you exiting yourself now? Zopa was a great platform early on but later on the rates offered were a bit low - probably the most successful P2P platform of all time. angrysaveruk - not sure which post you are referring to but I agree about the risk of platforms closing over the next couple of years is high although many will use the institutional investor excuse for 'removing' retail lenders. No doubt there will be some element of truth in the excuse but as they have acted with increasing opaqueness over the last few years I have my doubts.
The problem, which is outside of the retail lender's control, is exactly how they go about it. We all know now once administrators get involved then you may get a few bites from what's left of the carcass. Or as one platform did, simply sell the loan book off resulting in a loss for all active lenders.
It's a very unsatisfactory conclusion to what could have been a promising industry but as usual, it was f****d up by the greed of a small minority of platform operators tarring everyone else. And don't get me started on the FCA - the organisation where you get promoted for failure.
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angrysaveruk
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Post by angrysaveruk on Jan 1, 2023 18:11:12 GMT
Impressive Returns, although I would say the risk of platforms closing down over the next 2 years is very high. Are you exiting yourself now? Zopa was a great platform early on but later on the rates offered were a bit low - probably the most successful P2P platform of all time. angrysaveruk - not sure which post you are referring to but I agree about the risk of platforms closing over the next couple of years is high although many will use the institutional investor excuse for 'removing' retail lenders. No doubt there will be some element of truth in the excuse but as they have acted with increasing opaqueness over the last few years I have my doubts.
The problem, which is outside of the retail lender's control, is exactly how they go about it. We all know now once administrators get involved then you may get a few bites from what's left of the carcass. Or as one platform did, simply sell the loan book off resulting in a loss for all active lenders.
It's a very unsatisfactory conclusion to what could have been a promising industry but as usual, it was f****d up by the greed of a small minority of platform operators tarring everyone else. And don't get me started on the FCA - the organisation where you get promoted for failure.
I was talking about the original posters returns, although your returns are also pretty good. I would say I made about 5.5% return per year over 10 years in P2P (2008 - 2019). I focused more on the platform I was investing in rather than the individual loans - I always viewed platform failure as the biggest risk. P2P made alot of sense from an economic perspective and still does in my opinion. Zopa was easily my favourite platform, I was very keen on AC for a bit until I decided some of the loans they were making didnt make sense in my personal opinion.
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Post by Ace on Jan 1, 2023 18:51:55 GMT
Excellent work as always Ace, many thanks for the post. I am not sure the comparison of Loanpad to FSCS protected accounts is unfair though - the point is that many people hold up Loanpad as exceptionally secure and the safest P2P. It pays 3.6% instant access, which of course is not fully guaranteed instant access as there is a risk that withdrawals are stopped if too many loans go bad, and there is a risk to capital if too many loans go bad (or the platform fails). This compares to (as of today on MSE) 2.86% FSCS fully protected and 3.0% FSCS capital protected returns on IA accounts. So it is a premium of 0.6-0.74% for that risk - which you may or may not think is worth it (FWIW I don't think it would be at the moment for me). Similarly for the 60 day account - not fully guaranteed with Loanpad. Pays 4.8%. MSE shows a 90-day notice account at 3.5%, or a 1 year fixed at 4.27% - obviously that is a longer period but it is fully secured. I think that is a slightly better risk/reward balance if you want short term access to the money (1.3% premium) but if I were putting it away for longer periods (as I suspect most LP investors are) again I don't think the current risk premium (0.53%) is sufficient. Instead, I'd take the FSCS 1 yr fixes and do a ladder approach investing smaller amounts each month - so in effect getting monthly access to the money in the future. As it is, I am doing neither FSCS long term accounts or Loanpad at the moment! FWIW I was biggish (mid-5 figures) in LP when rates were higher (5%) and inflation was lower. I am also using LP intermittently when I have some P2P losses that need offsetting - thus getting the interest effectively tax free. Finally, I doubt many people are getting 5.88% as you are - that would clearly skew the balance much more in favour of LP. Let's hope ABL doesn't wipeout too much XIRR (I undertook aggressive risk management in 2020 and sold almost all my ABL loans, many at significant discounts [up the maximum] when I could, which reduced XIRR from over 12% to mid-9%, but put me in a position where my two remaining defaulted loans (Antonovs and Valves, where I was unfortunately relatively overweight) could be total losses and I would still have a 6%+ overall XIRR with ABL).   Good luck for 2023 and happy new year! Thanks. I agree with most of your analysis. In fact it seems to boil down to whether the Loanpad Premium over FSCS protection is sufficient to compensate for the extra risk. On balance, you think it isn't and I think it is, but I have to admit that the balance is close for me at the moment. This might boil down to my perceived risk of losses at loanpad being lower than your's. I'm also expecting the balance to swing more towards Loanpad soon, so it's also worth hanging on for a bit to see for me, rather than go through the hassle of moving funds. I'm probably being a bit over pedantic here, but... There are a couple of reasons why I think that people make unfair comparisons between FSCS protected accounts and Loanpad. One of those, admittedly a fairly minor one, is that they compare the AER rates quoted for FSCS protected accounts with the simple interest rates quoted for Loanpad. To make these directly comparable the Loanpad rates need to be converted to an XIRR (which is equivalent to an AER). So, the Classic account rate, 3.7% from today, would be 3.77%. So, the Loanpad Premium, using your figures above (plus the new 3.7% rate) would be 0.77-0.91%. This premium would rise to 0.87-1.01% from next month when Loanpad's simple interest rate rises to 3.8% (3.87% XIRR). From today, the Premium account pays simple interest of 4.9% (5.02% XIRR), giving a 1.52% premium over your quoted 3.5% for a 90 day account. Again, the simple interest for this account rises to 5.0% next month (5.13 XIRR), so a 1.63% premium. The other, and main, reason where I don't think people make fair comparisons is where they use an FSCS account with a much longer access time. Your example of a 1 year fixed account just isn't a fair comparison for me. 60 day access is a major feature of the premium account for me, especially when the average access time can be halved to 30 days with rolling withdrawals, and usually instant access is allowed for a small fee. Yes, the access isn't guaranteed. So that needs to be taken into account when assessing the premium, but so does the fact that the access has always been granted so far throughout the life of the account. And when the mechanics of the account are understood, it's hard to see a situation where regular access to funds wouldn't be provided. This access allows me to run my Loanpad account as a secondary high interest current account in a way that wouldn't be practical with multiple 1 year fixed accounts, and certainly wouldn't be anywhere near as simple and convenient. Again, the access isn't guaranteed, so alternate sources of funds need to be available just in case. This isn't an issue for me since I maintain an emergency fund anyway, and in addition to this I would usually have a large number of alternative sources of funds from other P2P accounts via regular payments and repayments or SMs. In addition to the above, I would expect Loanpad to continue to raise rates further anyway, whilst I expect that FSCS rates may have already peaked. Loanpad's constant increase in funds on the platform has stalled for the past couple of months at around £76m, so they clearly need to raise rates to maintain the previously rapid platform growth. They have been creating many new loans lately at rates over 8% to Loanpad, so they should be able to increase rates further and still maintain their platform cut of around 2%. I think they should have raised rates faster to maintain that previous growth, even if that meant a short term drop in profitability, as it will be difficult to attract funds back that have been moved to longer term accounts. Thanks for the good wishes. Back at ya.Â
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Post by Ace on Jan 1, 2023 19:10:45 GMT
Overall my XIRR equates to 5.69% although no doubt if I had 'hung around' it would be far lower. Was it all worth it? - I'm in two minds. In the early days the amount of DD required was minimal but as the platforms became increasingly opaque the DD work required, often leading to a several dead-ends, then answer today would be a big no. So P2P is not for me today especially as the trust factor has gone and there are several superior opportunities elsewhere.
I'm interested that you say that you have no doubt that you would have done worse if you'd have continued with P2P. You say you stopped around 5 years ago, which was when I started. Your earlier returns were lower than I'm getting now, which implies that you would have done better if you had continued, or at least would cast doubt on whether you would have done worse. I realise that your returns are more concrete as you have exited. Is it simply that you assume that I will suffer more losses than I predict?
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Post by Ace on Jan 1, 2023 19:24:38 GMT
Impressive Returns, although I would say the risk of platforms closing down over the next 2 years is very high. Are you exiting yourself now? Zopa was a great platform early on but later on the rates offered were a bit low - probably the most successful P2P platform of all time. No, I'm not exiting. I continue to adjust my platform mix, but I'm increasing my investments where possible, for the reasons given in the 4th para of my OP. I'm a big fan of P2P because it works so well for me. Why is it that you think the risk of platform closure is very high? There will always be a churn of platforms, but are you suggesting that the rate of closures will increase for some reason?
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agent69
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Post by agent69 on Jan 1, 2023 22:03:56 GMT
My summary for 2022:
- investments made in P2P platforms - nil
- capital and interest recovered from P2P platforms - nil
- amount still locked up in non performing loans / platforms - I lost interest in monitoring this a long time ago
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bugs4me
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Post by bugs4me on Jan 1, 2023 23:03:35 GMT
Overall my XIRR equates to 5.69% although no doubt if I had 'hung around' it would be far lower. Was it all worth it? - I'm in two minds. In the early days the amount of DD required was minimal but as the platforms became increasingly opaque the DD work required, often leading to a several dead-ends, then answer today would be a big no. So P2P is not for me today especially as the trust factor has gone and there are several superior opportunities elsewhere.
I'm interested that you say that you have no doubt that you would have done worse if you'd have continued with P2P. You say you stopped around 5 years ago, which was when I started. Your earlier returns were lower than I'm getting now, which implies that you would have done better if you had continued, or at least would cast doubt on whether you would have done worse. I realise that your returns are more concrete as you have exited. Is it simply that you assume that I will suffer more losses than I predict? Sorry - re-reading my post it required more clarification. If I had not 'cashed out' as much as possible with regards to say FS and LY and continued with the sums I had invested then using my preferred method of calculating - administrators in, I basically write-off what is locked in. If I was more positive about those vultures administrators no doubt I would put a more positive spin on things. But each to their own. So I'm not totally out although I view those zombie loans as worthless. Hopefully I'm wrong.
The AC performance was in the early heady days but after a senior director left and the platform became more opaque I simply wasn't comfortable. Plus my S&S were outperforming the lower returns available with P2P. It's not an exact science but you need as much information as possible before deciding to commit your hard earned cash and whatever way you look at it, the amount of time doing basic DD on loan offerings made it simply not worth the time and effort. This coupled when discovering that in more than one loan the platform(s) concerned had a vested interest so......
Another view was maybe 3-4 years ago there was a dash for cash by many platforms. T's&C's were quietly changed and loans that should have been written off/crystallised were simply left in default mode. But if you're doing well then that's good news but the rates on offer simply do not justify the risk for me when there are better opportunities elsewhere.
Of course if you can spend the time it may be a different scenario.
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angrysaveruk
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Post by angrysaveruk on Jan 1, 2023 23:12:35 GMT
Impressive Returns, although I would say the risk of platforms closing down over the next 2 years is very high. Are you exiting yourself now? Zopa was a great platform early on but later on the rates offered were a bit low - probably the most successful P2P platform of all time. No, I'm not exiting. I continue to adjust my platform mix, but I'm increasing my investments where possible, for the reasons given in the 4th para of my OP. I'm a big fan of P2P because it works so well for me. Why is it that you think the risk of platform closure is very high? There will always be a churn of platforms, but are you suggesting that the rate of closures will increase for some reason? I get the impression that a lot of people are exiting P2P which obviously means platforms will find it hard to cover their costs or find investors to bank roll them - I might be wrong. All the reasons that got me into P2P in the first place (growing market for a new fintech product), low interest rates in bonds/deposits and QE reducing credit risk have gone. Personally I am very glad I am no longer in P2P but good luck to those who want to stick with it.
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littleoldlady
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Post by littleoldlady on Jan 2, 2023 8:32:05 GMT
Overall my XIRR equates to 5.69% although no doubt if I had 'hung around' it would be far lower.
I'm interested that you say that you have no doubt that you would have done worse if you'd have continued with P2P. You say you stopped around 5 years ago, which was when I started. Your earlier returns were lower than I'm getting now, which implies that you would have done better if you had continued, or at least would cast doubt on whether you would have done worse. I realise that your returns are more concrete as you have exited. Is it simply that you assume that I will suffer more losses than I predict? If you look at both his portfolio and mine you will see that we both made good returns from Lendy, Moneything, Wellesley and he won with Funding Secure and I did with Collateral. All of these platforms subsequently lost an awful lot of investors' cash and the reason we didn't was that we exited while still ahead. I think this explains his comment. A lot of platforms followed a similar trajectory, initial success followed by a rush to expand to meet lender demand leading to reckless lending and eventual collapse. Any platforms still trading require careful monitoring and I advise a safety first approach at the first sign of trouble. However it may be that you started after the cowboys had been eliminated and all current platforms are more secure. For your sake I hope so.
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angrysaveruk
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Post by angrysaveruk on Jan 2, 2023 13:22:26 GMT
I'm interested that you say that you have no doubt that you would have done worse if you'd have continued with P2P. You say you stopped around 5 years ago, which was when I started. Your earlier returns were lower than I'm getting now, which implies that you would have done better if you had continued, or at least would cast doubt on whether you would have done worse. I realise that your returns are more concrete as you have exited. Is it simply that you assume that I will suffer more losses than I predict? If you look at both his portfolio and mine you will see that we both made good returns from Lendy, Moneything, Wellesley and he won with Funding Secure and I did with Collateral. All of these platforms subsequently lost an awful lot of investors' cash and the reason we didn't was that we exited while still ahead. I think this explains his comment. A lot of platforms followed a similar trajectory, initial success followed by a rush to expand to meet lender demand leading to reckless lending and eventual collapse. Any platforms still trading require careful monitoring and I advise a safety first approach at the first sign of trouble. However it may be that you started after the cowboys had been eliminated and all current platforms are more secure. For your sake I hope so.
I took the view that even if some of the loans were "junk" there was so much new money flowing into P2P that as long as I kept jumping to the next latest and greatest platform I would stay ahead of the defaults. Like with all new financial products there was a bit of a ponzi scheme going on, with platforms hiding bad debt with all the new money flowing in. I remember in about 2013 speaking to an investment banker type who told me he used P2P platforms as his bank account for his cash and another young professional chap (who came across as being a bit gullable) who had put his life savings for a house deposit on Funding Circle - I doubt very much they would do that today. I made a great return on P2P, but like alot of people I got over confident and had way too much invested in P2P at one point. Thankfully apart from a few hundred quid left in bad loans in Assetz Capital I am out totally, at one point I had well into 6 figures invested.
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starfished
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Post by starfished on Jan 2, 2023 14:13:24 GMT
(Upfront apologies could not figure out an easy way to put in tables)
Partly because I joined Zopa pre regulation, I always embedded a capital loss assumption into the yield calculation as follows below. Nowadays all it serves to do really is supress the return on unbolted.
Days late Capital Loss
15 25%
30 50%
45 75%
60 100%
When Ratesetter came on the scene I also introduced a risk reserve. It was due to the noise on the boards at the time that Ratesetter had to be more risky than Zopa. 5% reduction was applied to Ratesetter and 0% to Zopa. However, the weighted average is applied to ALL p2p balances. The current reduction factors are as per below, with no real science behind it just a combination of gut feel and board noise. This is in addition to the above days late reductions.
5% Abundance
5% Unbolted
10% Ablrate
10% Loanpad
15% Moneything
15% Lending Work
15% Elfin
15% CrowdProperty
XIRRs (implicitly includes the above adjustments)
Closed (date is when i joined)
Zopa 14/07/2010 3.2%
Ratesetter 26/02/2011 4.5%
IsePankur 23/12/2012 9.3%
Bond Mason 29/01/2017 6.3%
Connective L 16/02/2021 9.8%
Administration & Withdrawing
Funding Secured* 03/09/2013 9.6%
Moneything** 12/06/2016 -4.3%
Lending Works 27/01/2018 3.1%
Ablrate 15/12/2020 4.5%
Rest Loanpad 07/04/2021 2.5%
CrowdProperty*** 24/05/2022 -1.8%
Elfin 06/07/2022 3.8%
Unbolted**** 07/12/2017 3.0%
Abundance + Triodos**** 21/11/2012 1.7%
* Only 2 loans left, value written down to nil
**c. 20 loans parts left, most written down to nil
***Impacted by the risk reserve and limited interest paid to date
**** Trying to increase balance
I have some tester money in the House Crowd and Property Partner. Never got around to building proper spreadsheets for them before I decided against them.
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Post by Ace on Jan 2, 2023 23:18:59 GMT
(Upfront apologies could not figure out an easy way to put in tables) Partly because I joined Zopa pre regulation, I always embedded a capital loss assumption into the yield calculation as follows below. Nowadays all it serves to do really is supress the return on unbolted. Days late Capital Loss 15 25% 30 50% 45 75% 60 100% When Ratesetter came on the scene I also introduced a risk reserve. It was due to the noise on the boards at the time that Ratesetter had to be more risky than Zopa. 5% reduction was applied to Ratesetter and 0% to Zopa. However, the weighted average is applied to ALL p2p balances. The current reduction factors are as per below, with no real science behind it just a combination of gut feel and board noise. This is in addition to the above days late reductions. 5% Abundance 5% Unbolted 10% Ablrate 10% Loanpad 15% Moneything 15% Lending Work 15% Elfin 15% CrowdProperty XIRRs (implicitly includes the above adjustments) Closed (date is when i joined)Zopa 14/07/2010 3.2% Ratesetter 26/02/2011 4.5% IsePankur 23/12/2012 9.3% Bond Mason 29/01/2017 6.3% Connective L 16/02/2021 9.8% Administration & Withdrawing
Funding Secured* 03/09/2013 9.6% Moneything** 12/06/2016 -4.3% Lending Works 27/01/2018 3.1% Ablrate 15/12/2020 4.5% RestLoanpad 07/04/2021 2.5% CrowdProperty*** 24/05/2022 -1.8% Elfin 06/07/2022 3.8% Unbolted**** 07/12/2017 3.0% Abundance + Triodos**** 21/11/2012 1.7% * Only 2 loans left, value written down to nil **c. 20 loans parts left, most written down to nil ***Impacted by the risk reserve and limited interest paid to date **** Trying to increase balance I have some tester money in the House Crowd and Property Partner. Never got around to building proper spreadsheets for them before I decided against them. An interesting concept starfished. Discussing what a sensible capital loss assumption is for each platform probably warrants a whole thread of its own, but here's a couple of points that jump out at me: If I've understood you correctly, for many of your platforms your assuming a capital loss equivalent to around 2 year's interest. So you'd need to invest for 2 years before you start to show a profit! Is it really worth investing in them at all if you're that pessimistic? You seem to be assuming the same loss rate on ABLrate (a high risk platform in wind-down that has already had some losses) as for Loanpad (largely recognised as the lowest risk platform out there)! And that losses on EM and CP, neither of which have declared any losses to date, will be even higher! I guess that I must have misunderstood.
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Greenwood2
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Post by Greenwood2 on Jan 3, 2023 7:34:11 GMT
An interesting concept starfished . Discussing what a sensible capital loss assumption is for each platform probably warrants a whole thread of its own, but here's a couple of points that jump out at me: If I've understood you correctly, for many of your platforms your assuming a capital loss equivalent to around 2 year's interest. So you'd need to invest for 2 years before you start to show a profit! Is it really worth investing in them at all if you're that pessimistic? You seem to be assuming the same loss rate on ABLrate (a high risk platform in wind-down that has already had some losses) as for Loanpad (largely recognised as the lowest risk platform out there)! And that losses on EM and CP, neither of which have declared any losses to date, will be even higher! I guess that I must have misunderstood. EM - Elfin Market? On Elfin I think losses are about 3% from tax info, but they are deducted from interest each month so you get what you see (like Zopa used to do).
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