Performance report for 2022 (and quarterly updates in 2023)

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. 

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? 

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.

(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.