SteveT
Member of DD Central
Posts: 6,875 
Likes: 7,924
|
Post by SteveT on Jan 23, 2016 16:09:37 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 ) Philosophically, I much prefer the SS / MT approach of trading loans only at par and I'd prefer AC keep with that too. However, pragmatically speaking, if there's a profit to be made by flipping parts then I'm not going to pass it up. My overall FS holdings have reduced a little because I've not been able to reinvest everything I've sold, but MT and AC have taken up the slack. Had the FS SM launched with par-only sales then I doubt I've have sold anything much, bar perhaps trimming a few larger holdings that I felt like de-risking a little. I lend via a company so there's no tax benefit to be had by selling at a premium (all my net profit is taxed the same, whether it arises from interest, cashback, sale premia or bonuses). Certainly I'm currently investing a bit more in some of the larger FS loans than I would if I didn't have a route to reduce later, but not dramatically so. I'm still dubious whether FS will continue to permit selling at a premium in the longer term and so treading cautiously.
|
|
|
|
Post by bracknellboy on Jan 23, 2016 16:23:48 GMT
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. quite. The only time that AC is ever going to show anything to buy other than transiently is when either a) supply is outstripping buyer demand in general b) a single loan or multiple loans from a single borrower means that supply outstrips demand for that specific loan/borrower c) an underwriter is offloading a large position (assuming of course that underwriters still retain a good %age of a loan after initial listing in the new 'underwrite only' model'. At all other times/instances parts listed for sale will be quietly mopped up and distributed according to targets. Or in the event that premium selling was allowed, when the premium being demanded is such that more experienced/savvy lenders are not willing to buy at that rate (i.e. not set targets which will mop up), leaving an apparently liquid aftermarket to tempt new lenders in to buy at rates others are not willing to do so.
|
|
|
|
Post by Deleted on Jan 23, 2016 16:30:53 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? Most of those loans are BTL (LTL might be a better phrase) loans. Evidence over the last two years on AC shows that you're likely to be correct that demand for these loans from lenders will be far less than typical. Prior LTL type loans took a while to sell down on the AM. Given the current supply-demand imbalance, however, I suspect AC will be able to get them away. The yield is being driven by what is competitive to win the borrower's business, not what is attractive to lenders. Borrower rates for LTLs are always going to be lower given that a few high street and most of the challenger banks are going to be in competition for this type of business. It also worth keeping in mind, however, that expected losses should also be lower. Default rates are lower and more typical of consumer loans than business loans. Recovery rates are more predictable as these are not property developments (the house exists) and are typically mainstream residential properties (so the valuation error is lower, liquidity better in distressed sale). Depending on your default and recovery assumptions this could be worth anything from 75bp-125bp in a benign environment to 200-300bp in a stressed environment. I also wouldn't over-rate the value of the provision fund on the GBBA. You'd be much better off self-insuring your own specific portfolio. It's only 1.3%. It can be instantly wiped out by a large loss and many lenders may find that they don't even own the protected loan. After that lenders are naked. It's worth far less than a equivalent sub-tranche on each individual loan.
|
|
agent69
Member of DD Central
Posts: 6,053
Likes: 4,441
|
Post by agent69 on Jan 23, 2016 16:34:52 GMT
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. I might be missing something (shouldn't have stopped by the pub at lunch time) but I don't see why GBBA eligibility should be an issue. Consider 2 examples: - Borrower A gets a loan at 15%, AC take 4% to cover their costs, 1% goes in the PF and lenders get 10%
- Borrower B also pays 15%, but it's a smaller loan and AC think they can get away paying 7% to lenders. They can still put 1% into the PF and keep 7% for themselves.
I don't see why low lender rate necessarily equates to low borrower rates. While there's 6 mil in the QAA looking for a home, there will always be a mug sucker unsophisticated investor who will think it's good value compared to savings account rates
|
|
agent69
Member of DD Central
Posts: 6,053
Likes: 4,441
|
Post by agent69 on Jan 23, 2016 16:38:09 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 There were BTL's in the early days at 6.5%, but I thought they came with splashback?
|
|
agent69
Member of DD Central
Posts: 6,053
Likes: 4,441
|
Post by agent69 on Jan 23, 2016 16:42:02 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. I can see where this is going. How can you say you're going to be precise and then use a word like appear. What evidence do you have that would lead you to conclude that they are being sold at a premium?
|
|
jonah
Member of DD Central
Posts: 2,031
Likes: 1,113
|
Post by jonah on Jan 23, 2016 16:45:13 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? QAA could take a chunk if needed as 7% is well over it's coupon and would help with the PF. That said, I would assume that that QAA would only buy if AC knew that there was demand exceeding supply.... hmmm. Imagine *insert graphic of crystal ball here* *insert wavy hands here and mystic music here*.... Loan X comes up, at £75000 with a 7% rate. AC see that whilst not vastly popular, £95000 of targets are set across all MLIA's before it is drawn down. They issue 50k into the MLIA giving most people close to what was asked for and put the rest into QAA. In QAA they have 25k of a product and by maintaining a view of the MLIA targets, they know that they can shift all of it at will at any time. So it is quite happily paying 7% into MLIA, of which 3.75% goes into customers and 3.25% goes into the PF but they are at almost no liquidity risk because they can see the entire market. If the net buy orders ever drops below say 30k (there would be 45k at the start in this example) then they could sell off a some QAA loan parts to keep their exposure small and proportionate to the net demand. This QAA really is a clever idea of AC's.
|
|
Balder
Member of DD Central
Posts: 646
Likes: 622
|
Post by Balder on Jan 23, 2016 16:55:34 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? Most of those loans are BTL (LTL might be a better phrase) loans. Evidence over the last two years on AC shows that you're likely to be correct that demand for these loans from lenders will be far less than typical. Prior LTL type loans took a while to sell down on the AM. Given the current supply-demand imbalance, however, I suspect AC will be able to get them away. The yield is being driven by what is competitive to win the borrower's business, not what is attractive to lenders. Borrower rates for LTLs are always going to be lower given that a few high street and most of the challenger banks are going to be in competition for this type of business. It also worth keeping in mind, however, that expected losses should also be lower. Default rates are lower and more typical of consumer loans than business loans. Recovery rates are more predictable as these are not property developments (the house exists) and are typically mainstream residential properties (so the valuation error is lower, liquidity better in distressed sale). Depending on your default and recovery assumptions this could be worth anything from 75bp-125bp in a benign environment to 200-300bp in a stressed environment. I also wouldn't over-rate the value of the provision fund on the GBBA. You'd be much better off self-insuring your own specific portfolio. It's only 1.3%. It can be instantly wiped out by a large loss and many lenders may find that they don't even own the protected loan. After that lenders are naked. It's worth far less than a equivalent sub-tranche on each individual loan. Hi exqftgeek, Be interested in where this can be found............. You'd be much better off self-insuring your own specific portfolio. It's only 1.3% Thanks
|
|
oldgrumpy
Member of DD Central
Posts: 5,087
Likes: 3,233
|
Post by oldgrumpy on Jan 23, 2016 17:02:01 GMT
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. Exactly so! The AC SM is active 24/7 it seems to me, and unlike on another platform I don't have to sit and wait then heave my fingers into frantic action. So far today I have purchased seven parts. Plenty of shrapnel, but overall in the last two days, about £300 in about twenty parts of various loans.
|
|
bob76
Posts: 103
Likes: 22
|
Post by bob76 on Jan 23, 2016 17:23:35 GMT
For AC, I can only rely on my own experience of getting shrapnel over the last weeks/months, despite having large buying instructions on many loans... It's quite clear that demand exceeds greatly supply, if someone sells a few hundreds pounds of loan parts on the market, this disappears in seconds, and buyers get pennies.
For FS, I don't know if people buy loans on the SM, but the ones with the higher rates (9% and above, considering the premium) surely disappear quickly, and I have bought quite a few myself (to create a portfolio of a few thousands of pounds in a few weeks, rather than wait for new loans to come online, and be in front of my computer at specific times).
I couldn't create a portfolio of thousand pounds on AC if I had started at the same time as FS.
|
|
|
|
Post by Ton ⓉⓞⓃ on Jan 23, 2016 17:28:09 GMT
Hi @exqftgeek , Be interested in where this can be found............. You'd be much better off self-insuring your own specific portfolio. It's only 1.3% Thanks If you want to find out how the PF stands www.assetzcapital.co.uk/our-investment-accounts/qa-account/has the figure which I believe is dynamic. Go about two thirds down the page to "How it works: Quick Access Account details" and then click on Provision Fund somewhere in the text is the answer. If AC move things around this link may not work in a month's time.
|
|
mikes1531
Member of DD Central
Posts: 6,453
Likes: 2,320
|
Post by mikes1531 on Jan 23, 2016 17:48:25 GMT
Given they are all BTL's and at higher rates than a number of previous similiar loans There were BTL's in the early days at 6.5%, but I thought they came with splashback? Yes, there were 6.5% BtLs. And IIRC some came with 3.5% cashback. I have seen 6.5% BtL loan parts appear on the SM and they do disappear, but sometimes they sit for quite a while before a buyer comes along. There's been a bit of Loan #173 (6.75%) for sale today, so we know there aren't any funded buying instructions for this loan left. That loan drew down on 3/Aug/15. That just happens to be the same day that the GBBA thread was started, so the loan probably was funded before the GBBA was released and therefore may not tell us much about how the current existence of the GBBA might affect the take-up of 7% BtL loans. I wouldn't have thought it would be easy for AC to find buyers for the £500+k of 7% loans on the Upcoming list very quickly, but perhaps speed isn't an issue. As someone else pointed out, AC could use the QAA to fund those loans at drawdown, which would produce some of the earnings they need for the QAA and help build up the QAA PF. AC then could drip feed the parts onto the SM as there was demand. As I've said in the past, inventing the QAA was a stroke of genius for AC!
|
|
Balder
Member of DD Central
Posts: 646
Likes: 622
|
Post by Balder on Jan 23, 2016 17:48:56 GMT
Hi Ton,
Thanks but I was more interested in finding where insurance can be purchased to cover potential losses.
|
|
|
|
Post by chris on Jan 23, 2016 17:53:47 GMT
For AC, I can only rely on my own experience of getting shrapnel over the last weeks/months, despite having large buying instructions on many loans... It's quite clear that demand exceeds greatly supply, if someone sells a few hundreds pounds of loan parts on the market, this disappears in seconds, and buyers get pennies. For FS, I don't know if people buy loans on the SM, but the ones with the higher rates (9% and above, considering the premium) surely disappear quickly, and I have bought quite a few myself (to create a portfolio of a few thousands of pounds in a few weeks, rather than wait for new loans to come online, and be in front of my computer at specific times). I couldn't create a portfolio of thousand pounds on AC if I had started at the same time as FS. This is best served through deal flow. Look at it from the other direction - if we created a mechanism via which existing lenders could cash out early and sell up on the aftermarket to allow new money to come in, without giving those lenders a new home for their funds all we're doing is encouraging old money to sell out and leave the platform at the new money's expense. That's not a smart approach. No matter what we do on the secondary market (or marketplace as we don't really have separate markets) we need new loans coming into the platform at the same rate as we can attract new funds and old loan repay. That is where we're focussing our efforts.
|
|
|
|
Post by chris on Jan 23, 2016 17:55:54 GMT
Hi exqftgeek, Be interested in where this can be found............. You'd be much better off self-insuring your own specific portfolio. It's only 1.3% Thanks If you want to find out how the PF stands www.assetzcapital.co.uk/our-investment-accounts/qa-account/has the figure which I believe is dynamic. Go about two thirds down the page to "How it works: Quick Access Account details" and then click on Provision Fund somewhere in the text is the answer. If AC move things around this link may not work in a month's time. It is a live figure, and it's worth reiterating that the provision funds stand on top of the asset protection not in lieu of it. I'm currently working on a mid term project to refresh the lender dashboard and will make sure the current PF figures are either moved to or linked from there to make them easier to find.
|
|
