bob76
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Post by bob76 on Jan 22, 2016 22:54:18 GMT
I don't see how premiums drives liquidity. It's just simply called the rules of supply and demand. Supply can be improved by deal flow and by giving incentives for people to sell some of their loan parts (price adjustment is usually a key element of regulating a market). Yes, AC has suddenly listed quite a few loans in the pipeline, but we are not talking about many loans actually available per week, so deal flow is not great. Therefore, what's left to do is give an incentive for people to trade existing loan parts on the aftermarket, and they need to make a profit. Some people will be happy to make a profit by just trading loans, as opposed to keep them. It's working on many other P2P sites, so not sure why AC always want to be different and overcomplicate things.
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Post by chris on Jan 23, 2016 0:00:07 GMT
It's working on many other P2P sites, so not sure why AC always want to be different and overcomplicate things. That has to be the first time we've been accused of overcomplicating things by not introducing a feature most lenders don't want. Hmm. Is it working on other sites? I don't know FS very well, but FC are plagued by bots and flippers that are only encouraged as they're the platforms equivalent of underwriters except they charge the lenders a fee for their service. 31 loans over 6 - 8 weeks is roughly one each working day, give or take, although they'll tend to clump together and lawyers do seem to like Fridays. That's pretty darned good deal flow for a site of our size and number of lenders, and this is just the first wave of loans coming through the new sales channels / process. The QAA will also be shifting its holdings as it tries to diversify, so there'll be loans being freed up there on top of the usual lender churn.
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Post by chris on Jan 23, 2016 0:17:23 GMT
Register -> Complete the ID check -> Deposit funds directly into the account you want to invest in (GEIA / GBBA / QAA) and the account manages the investment for you. I completely agree we can do a better job of explaining that but the actual system of investing is trivial unless you want to go into the detail, start reading credit reports, and picking and choosing which loans you invest in. Within "the account you want to invest in (GEIA / GBBA / QAA)" is an awful lot of complexity to explain to a newcomer - before even getting as far as mechanisms, how do they choose which they prefer until they understand what each of these is/does. Within each of the main accounts, a newcomer also needs to understand the concept that they can't just buy directly (even if there are units available for immediate investment), but must place an order that the system might think about processing some time within the next few days (or, at least in part, within a few minutes if there's stuff immediately available). The main thing the two sites seem to have in common is a chronic shortage of loans drawing down. AC's re-invention of fractional reserve banking (the QAA) is probably the easiest to understand on a superficial level for those used to regular bank deposit accounts (as it works in essentially the same way - taking potentially short-term deposits from investors, and using them as backing for longer-term investments in the hope that not everyone will withdraw at once, or if they do that the underlying assets will still remain liquid), however, its operation has a knock-on effect on the other accounts due to its preferential access to the markets, making them even harder to understand and use. A more traditional P2P site may well be harder to understand on a superficial level, but once the basic concepts are understood, there aren't any "hidden surprises". In isolation any P2P site is complex to a newcomer. Remember we're being compared to other sites and told we're complex. Explaining the GEIA / GBBA / QAA is no more difficult than explaining to a SS user what bridging loans are and how to go about picking and choosing a good loan, let alone then telling them how to play the games needed to actually obtain loan units. Whether we're explaining it well or not is a different issue, and one where I agree we're not doing a good enough job. The QAA is also not fractional reserve banking. It is still £1 in £1 lent same as the rest of the platform. There is just an emphasis on access times which are partially enabled by having some cash sat idle, along with several other clever computer systems that keep access times to milliseconds and allow automatic deposits and withdrawals on demand from other accounts. Its operation is of no concern to most users, only those that want to understand the detail of how the system works. Most users just want their funds to be invested and earning a return, they don't care about priorities in marketplaces as long as they can get their funds deployed in the loans they want. If the upturn in deal flow had hit a few months ago lenders probably wouldn't even have noticed any priorities being given in the aftermarket. I also think it's naive to think that there aren't any hidden surprises in any of the platforms. RS, SS, FC, all have their own surprises as I'm sure every other platform will do too.
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bob76
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Post by bob76 on Jan 23, 2016 5:36:41 GMT
Is it working on other sites? I don't know FS very well, but FC are plagued by bots and flippers that are only encouraged as they're the platforms equivalent of underwriters except they charge the lenders a fee for their service. FS introduced their aftermarket recently, and it seems to be working well. Pretty much all loan parts sold are at a premium, meaning that those would probably not be sold otherwise (people having to sell to release cash wouldn't put a premium). I have only started using FS recently (couple of months), and managed to build a diversified portfolio fairly quickly, mainly relying on the second market. If I had joined AC at the same time, I would have bought a few hundred pounds of loans at best. Yes, I have a somehow balanced sizable portfolio on AC now, but that's just by buying pennies on a daily basis against the higher quality loans. Surely, bots are not a valid reason not to implement or rollout a feature, and I can think of many simple ways of stopping them anyway. Just put a maximum number of transactions per hour, day, week or month and you are sorted. If you think that just your deal flow will create some meaningful activities on the second market (i.e. loans for people to buy), then we shall see very soon. I can bet a few hundred pounds of loans will be sold on the second market once a new loan is available (people rebalancing/diversifying), and this will last for a few minutes. If I was working for AC, I would surely have accounts on all the main P2P platforms and do competitive analysis regularly (or get an intern to do it). There are some good ideas and features to borrow from competitors. However, AC wants to be different (and have £0 for sale on its second market currently). Between many new loans not being that attractive (in term of relatively low rates for high LTVs), and new comers have nothing to buy in the short term when they register on the platform (and trying to understand its complexity), we will see how the strategy works.
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pikestaff
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Post by pikestaff on Jan 23, 2016 8:18:18 GMT
At least you have more chance of getting your money back with SS, which is pretty dam important!!!!!!!!!!!!!!!!!!! Well, that is a claim and a half! Just your "damned" opinion, of course, and without anything to substantiate it. Certainly SS is simple enough and so is the lottery. SS give hardly any information about how the income to repay the loan is to be generated, and hardly ever answer any questions (& certainly don't allow the occasional piece of information they give out via Q&A to be shared with other investors). Very simple indeed. ... I do get the impression that there are a lot P2P investors out there who only look at the LTV, assume the valuer can foresee the future accurately, and think their capital will always be safe. I think SS encourage this view. AC give out far more information so that a more balanced view of the loan can be taken. Quite. Only when the tide goes out do you discover who's been swimming naked.
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Post by andrewholgate on Jan 23, 2016 9:34:15 GMT
On the loan mentioned, this is a low LTV loan, small in terms of debt size and there are mitigants as to the start up nature. LTV is just outside of bounds for the rate with the current criteria. Those criteria are being reviewed so it may qualify in future. Would you believe these two chaps are talking about the same loan? How can andrewholgate refer to this loan as "low LTV" when it has an LTV of 73.6% -- of which 58.5% is from the first charge -- and its LTV is so high that it can't be included in the GBBA.? I also can't quite work out why chris says the "LTV is just outside of bounds" for the GBBA when the website description says "The maximum loan-to-value ratio for individual loans included in the GBBA is three-quarters (75%) of each property's value." I suspect that the key is in Chris's words "for the rate", which suggests to me that for low-rate loans the LTV has to be below 75% in order to be eligible for the GBBA. And I suppose that makes sense since low-rate loans will contribute less to the PF so they need to be lower risk. But in the interest of transparency I think this should be made clear in the description of the GBBA. Maybe low isn't the right word. However you can get a 70k loan on other platforms with no security. Take your pick!
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jonah
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Post by jonah on Jan 23, 2016 10:07:06 GMT
Is it working on other sites? I don't know FS very well, but FC are plagued by bots and flippers that are only encouraged as they're the platforms equivalent of underwriters except they charge the lenders a fee for their service. FS introduced their aftermarket recently, and it seems to be working well. Pretty much all loan parts sold are at a premium, meaning that those would probably not be sold otherwise (people having to sell to release cash wouldn't put a premium). I have only started using FS recently (couple of months), and managed to build a diversified portfolio fairly quickly, mainly relying on the second market. If I had joined AC at the same time, I would have bought a few hundred pounds of loans at best. Yes, I have a somehow balanced sizable portfolio on AC now, but that's just by buying pennies on a daily basis against the higher quality loans. Surely, bots are not a valid reason not to implement or rollout a feature, and I can think of many simple ways of stopping them anyway. Just put a maximum number of transactions per hour, day, week or month and you are sorted. If you think that just your deal flow will create some meaningful activities on the second market (i.e. loans for people to buy), then we shall see very soon. I can bet a few hundred pounds of loans will be sold on the second market once a new loan is available (people rebalancing/diversifying), and this will last for a few minutes. If I was working for AC, I would surely have accounts on all the main P2P platforms and do competitive analysis regularly (or get an intern to do it). There are some good ideas and features to borrow from competitors. However, AC wants to be different (and have £0 for sale on its second market currently). Between many new loans not being that attractive (in term of relatively low rates for high LTVs), and new comers have nothing to buy in the short term when they register on the platform (and trying to understand its complexity), we will see how the strategy works. Drifting more off topic here, but.... Fs SM has a lot of concerns, discussed on this forum. Please see the thread on that board. When the SM opened I hoped that it might allow me to use that site. After a weeks experience I decided it was highly flipper activity, driving people to buy more than they wanted to sell at a premium, making the pm even tighter. It allows people to get interest and legally avoid tax. I sold out (admittedly at a small profit) and apart from skimming the fs board here occasionally haven't looked back. Definitely not the example you want to use to advocate premiums imho. You might be buying pennies in AC but two factors.... They don't require you to monitor anything to buy them and the deal flow has been dire. Assuming that the pipe moves as hoped in the future the real strength of AC should shine which is the auto buy against your targets. As people buy new loans they will offload old ones and rebalancing occurs for all... But with AC this doesn't need you playing fff or similar. AC has, imo, a great approach here. Not an easy one to get your head around and one which needs good deal flow to shine, but hopefully will be great in the coming weeks. The idea of limiting transactions per unit time totally goes against the 'machine does the work' approach in AC once you have set targets. Please don't do this! Getting closer to the topic, I agree that the quality and quantity of new loans will determine the desire to buy, which in turn drives sales of older loans which allows other people to buy them. Considering the length of time AC has been at limited new loans I expect it may take a while for there to be a lot of churn, but I am hopeful it will get there. And having a buy order on a loan which doesn't trigger doesn't cost you anything. You can have several times the orders as you have cash on hand and just watch them all snaffle parts as they go.
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mikes1531
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Post by mikes1531 on Jan 23, 2016 15:03:48 GMT
FS introduced their aftermarket recently, and it seems to be working well. Pretty much all loan parts sold are at a premium... : How do you know this? While I agree that nearly all parts on the FS SM are offered at a premium, I haven't a clue what proportion of parts on the FS SM are sold at a premium. What proportion of parts offered end up being removed from the SM because their calculated return to a buyer drops below the minimum allowed, or because they haven't been bought within the time limit FS have set. Who beside FS actually know what's happening? Have FS ever revealed how much activity their SM actually is having?
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SteveT
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Post by SteveT on Jan 23, 2016 15:09:49 GMT
Well I've sold about £18k of parts at 1% premium and £500 at 2%. Nothing at par because I don't list them. However I've bought around £2k at par from others.
Most things listed above about 9% / 9.25% will sell eventually. Very little below 8.75% will sell, other than some of the small jewellery / watch loans.
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ilmoro
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Post by ilmoro on Jan 23, 2016 15:37:08 GMT
Well I've sold about £18k of parts at 1% premium and £500 at 2%. Nothing at par because I don't list them. However I've bought around £2k at par from others. Most things listed above about 9% / 9.25% will sell eventually. Very little below 8.75% will sell, other than some of the small jewellery / watch loans. The interesting question is how much influence did the availability of premia have on you decision to sell a) Premia meant you invested extra at launch in order to flip at a premium to make a profit and ability to reinvest was irrelevant. b) You sold to transfer the tax liability and would have sold anyway even at par c) You sold to eliminate the chance of default d) You sold becuase you knew you could reinvest the capital quickly and you could make a profit without risk of idle funds Given that currently only one of these answers would apply to AC currently Im not sure FS is a particularly good example in this argument. (I expect the answer is all four )
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mikes1531
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Post by mikes1531 on Jan 23, 2016 15:46:26 GMT
I see that there are a half dozen loans on the Upcoming Loans list that currently are showing an interest rate of 7%. I understand that those rates might increase before the loans go live but, if they don't, I can't figure out who AC would find to invest in those loans.
AC can't put them into the GBBA because they pay the same return as the GBBA so they couldn't contribute to the Provision Fund. And who would invest directly in a 7% loan and take on the risk of default when they could earn 7% from the GBBA and be covered by the PF?
What am I missing/forgetting?
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bob76
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Post by bob76 on Jan 23, 2016 15:51:40 GMT
bob76 : How do you know this? While I agree that nearly all parts on the FS SM are offered at a premium, I haven't a clue what proportion of parts on the FS SM are sold at a premium. What proportion of parts offered end up being removed from the SM because their calculated return to a buyer drops below the minimum allowed, or because they haven't been bought within the time limit FS have set. Who beside FS actually know what's happening? Have FS ever revealed how much activity their SM actually is having? OK, let's be more precise with wording (as some people are picky): the FS SM market seems to always have a good supply of loan parts to buy, and most of those appear to be sold at a premium. AC SM market seems to often show nothing available to buy.
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bob76
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Post by bob76 on Jan 23, 2016 15:56:27 GMT
And who would invest directly in a 7% loan and take on the risk of default when they could earn 7% from the GBBA and be covered by the PF? From AC's website: "The Provision Fund targets a cash balance of up to 5% of the GBBA's total assets at any one time and is currently at a 1.3% level based on funding to date." Therefore, maybe some people would rather invest directly in 7% loans, knowing the actual security and risks, as opposed to a GBBA, which only has a partial PF cover.
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ilmoro
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Post by ilmoro on Jan 23, 2016 15:58:19 GMT
I see that there are a half dozen loans on the Upcoming Loans list that currently are showing an interest rate of 7%. I understand that those rates might increase before the loans go live but, if they don't, I can't figure out who AC would find to invest in those loans. AC can't put them into the GBBA because they pay the same return as the GBBA so they couldn't contribute to the Provision Fund. And who would invest directly in a 7% loan and take on the risk of default when they could earn 7% from the GBBA and be covered by the PF? What am I missing/forgetting? Given they are all BTL's and at higher rates than a number of previous similiar loans I guess AC are going on the basis that people have invested in several loans at less than those rates (since GBBA launch I think). Seem to recall this discussion occurring when the last of those appeared, Expat or Stockport Flexibility of managing your own investments that the GBBA doesnt give you, maybe
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Post by chris on Jan 23, 2016 15:58:56 GMT
bob76 : How do you know this? While I agree that nearly all parts on the FS SM are offered at a premium, I haven't a clue what proportion of parts on the FS SM are sold at a premium. What proportion of parts offered end up being removed from the SM because their calculated return to a buyer drops below the minimum allowed, or because they haven't been bought within the time limit FS have set. Who beside FS actually know what's happening? Have FS ever revealed how much activity their SM actually is having? OK, let's be more precise with wording (as some people are picky): the FS SM market seems to always have a good supply of loan parts to buy, and most of those appear to be sold at a premium. AC SM market seems to often show nothing available to buy. Showing nothing available doesn't mean things aren't sold. When someone lists a loan unit for sale all buy instructions are immediately checked and the sale will complete if there are buyers without the loan unit(s) ever being visibly listed for sale. It's a different model and the experience on one doesn't translate well to the other.
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