sl75
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Post by sl75 on Aug 3, 2015 20:43:07 GMT
I did find one thing interesting... I've not done the maths, but I suspect that the average non GIEA loan gives a higher interest rate than the average Geia one... Was the decision on having the same interest rate to avoid too much money transferring or have I missed something? I'd guess that if they acheive a ready supply of money from the GBBA going forwards, AC will be able to drive the rate of non-GEIA loans down towards 7% + risk premium, making them more attractive to borrowers. Past loans at higher average interest rates will allow the PF for the GBBA to be boosted initially, until the lower "normal" rates kick in. i.e. enjoy the higher interest rates while they last!
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ilmoro
Member of DD Central
'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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GBBA
Aug 3, 2015 21:02:25 GMT
Post by ilmoro on Aug 3, 2015 21:02:25 GMT
I did find one thing interesting... I've not done the maths, but I suspect that the average non GI loan gives a higher interest rate than the average Geia one... Was the decision on having the same interest rate to avoid too much money transferring or have I missed something? I'd guess that if they acheive a ready supply of money from the GBBA going forwards, AC will be able to drive the rate of non-GEIA loans down towards 7% + risk premium, making them more attractive to borrowers. Past loans at higher average interest rates will allow the PF for the GBBA to be boosted initially, until the lower "normal" rates kick in. i.e. enjoy the higher interest rates while they last! Not a huge difference at moment. The five loans its currently investing in are all 10%, except one at 9.25%. Seems to be acting normally currently, after initial investment it had a snooze & then woke up around 7 and had a bit of a diversify to get closer to 20%. I shall use it to store surplus cash whilst waiting for new loans. My only disappointment so far is the lack of cake, mentally the name & abbreviation hints at cake, at least initially GBB 
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pikestaff
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GBBA
Aug 3, 2015 21:12:28 GMT
Post by pikestaff on Aug 3, 2015 21:12:28 GMT
...I did find one thing interesting... I've not done the maths, but I suspect that the average non GIEA loan gives a higher interest rate than the average Geia one... Was the decision on having the same interest rate to avoid too much money transferring or have I missed something? I would think it has to do with expected losses. A higher gross rate should imply a higher default rate. In a perfect world the net return after losses should be roughly similar.
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GBBA
Aug 3, 2015 21:34:54 GMT
Post by chris on Aug 3, 2015 21:34:54 GMT
...I did find one thing interesting... I've not done the maths, but I suspect that the average non GIEA loan gives a higher interest rate than the average Geia one... Was the decision on having the same interest rate to avoid too much money transferring or have I missed something? I would think it has to do with expected losses. A higher gross rate should imply a higher default rate. In a perfect world the net return after losses should be roughly similar. That's certainly one very big factor in the equation. I guess one of the differences we have is that you don't have to invest via that product with that provision fund, you can always invest manually yourself to build your own balanced portfolio.
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sl75
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GBBA
Aug 3, 2015 21:37:12 GMT
jonah likes this
Post by sl75 on Aug 3, 2015 21:37:12 GMT
Not a huge difference at moment. The five loans its currently investing in are all 10%, except one at 9.25%. As I understand it, 10% loans make a quite substantial annual 3% contribution to the PF, which (considering that the security means that even defaulting loans are unlikely to lead to a substantial loss) is quite a large allowance to compensate losses. Until now, rates higher than 10% have been readily available on the platform. Going forward there will seem little need for this. One other thought - green loans may become more widely available over the next few days/weeks, as existing GEIA investors who were only there for the PF find that they can put their money elsewhere for the same effect.
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jonah
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GBBA
Aug 4, 2015 5:08:06 GMT
Post by jonah on Aug 4, 2015 5:08:06 GMT
On that thought, it would be interesting to see the size of the growth rates of investment into both accounts for the next few months. the PF documentation suggests a maximum of 5% but no lower limit. With a 3% gap for several loans that should* help populate the PF although I'm guessing that ac will have already seeded it in a similar way to Geia. personally I'm intrigued by the suggested 'non repackaged ' account suggested and recalling the timeline suggested recently there should need to be a huge wait.  That said, I suspect that GBBA will be a success for a particular audience and I think I will probably have a nibble for slightly other reasons. |
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Post by oldnick on Aug 4, 2015 5:47:08 GMT
chris, page 11 of the assetz capital p2p guide rather pours cold water on provision funds - might be worth a rewrite?
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GBBA
Aug 4, 2015 6:28:15 GMT
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Post by oldnick on Aug 4, 2015 6:28:15 GMT
chris, page 11 of the assetz capital p2p guide rather pours cold water on provision funds - might be worth a rewrite? Are speaking as an investor in AC? Or as a lender? Speaking as a investor, I think it has it about right although I imagine the use of the word "slush" will go. Both actually. I just think they should have a consistent view on the facility to avoid confusing those new to the scene.
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pikestaff
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GBBA
Aug 4, 2015 7:22:27 GMT
Post by pikestaff on Aug 4, 2015 7:22:27 GMT
I would think it has to do with expected losses. A higher gross rate should imply a higher default rate. In a perfect world the net return after losses should be roughly similar. That's certainly one very big factor in the equation... Another important factor will be the incidence of late payments, which I would expect to be much more common in the GBBA than in the GEIA. Even if most of those defaults do not turn into losses (because of the security), there will often be significant delays in receiving cash, and so the provision fund will be acting as a liquidity facility, as well as covering actual losses. All on a discretionary basis, of course. Which leads me to a question. It is clear from the website is that if interest is late it will be paid out of the provision fund (which will be reimbursed from actual interest when received). However, the position regarding late payment of capital is less clear. The summary description says that the provision fund will make capital payments "if a loan defaults and the security when sold does not cover the loan balance remaining". This implies that mere late payment of capital will not be covered. But further down the page it says "It is the intention that, subject to funds being available, APFL would pay out under all reasonable circumstances where there is a genuine credit loss or missed / delayed payment...". This implies that it will be covered. Which is correct?
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Post by stuartassetzcapital on Aug 4, 2015 8:21:06 GMT
Hi pikestaff, yes if interest is due to be paid on a certain date and is missed then the Provision Fund (PF) is there to help pay that to help monthly interest on the account remain at 7%. If capital repayment is due and is late/ a default happens then interest continues to accrue on an interest-accrued loan and would continue to accrue (and would not be paid by the PF) until recovery had been completed and then the total accrued interest would be paid out including the default period. If the loan had monthly interest then this would be eligible for payment by the PF at that time of missed payment on a discretionary basis until full recovery had been completed. Due to interest accruing (or being paid in the case of monthly payment loans) and prior to any capital loss having been crystalised, no payout of any capital would occur from the PF until the recovery and any possible loss was crystalised, at which point if all capital and also accrued interest had been paid then no PF payment would be required. If there was a shortfall then the PF would be asked to pay. Given the Great British Business Account (GBBA) account is designed for income investment then this approach is fair as an extended period of default interest accruing for the investor is aligned with the core objective of the account, income. Bear in mind the GBBA ONLY factors in property security to its 75% LTV test/ 130% security cover dual test. All other security is a 'free' bonus. This is the most secure Assetz Capital investment account to date in our lenders' view as they mostly prefer residential or vacant-possession valued commercial property as their security of choice. A calculated probability of default remains, for sure, per loan, as does theoretical potential for losses but for 'strength of security' reasons the Expected Loss (EL) calculation on these loans is zero in all but a 25%+ property value stress test whereas without that security the EL on the loan book could be several percentage points. To answer a couple of prior pricing questions, this account offers the same rate of return as the Green Energy Investment account for two reasons; the security is even stronger in the GBBA vs the GEIA in the view of our lenders, however not all loans pay monthly interest in cash - we felt these two balanced each other out and have launched Series 1 of the GBBA with the same rate of interest. |
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pikestaff
Member of DD Central
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GBBA
Aug 4, 2015 10:56:18 GMT
Post by pikestaff on Aug 4, 2015 10:56:18 GMT
...Due to interest accruing (or being paid in the case of monthly payment loans) and prior to any capital loss having been crystalised, no payout of any capital would occur from the PF until the recovery and any possible loss was crystalised, at which point if all capital and also accrued interest had been paid then no PF payment would be required. If there was a shortfall then the PF would be asked to pay. Given the Great British Business Account (GBBA) account is designed for income investment then this approach is fair as an extended period of default interest accruing for the investor is aligned with the core objective of the account, income... Stuart, thank you for the clarification. This is consistent with the summary, and I have no problem with it. However, I think you should refine the wording of the second of the two extracts that I quoted.
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GBBA
Aug 4, 2015 13:48:19 GMT
Post by stuartassetzcapital on Aug 4, 2015 13:48:19 GMT
Yes we will, already actioned for next week hopefully, thanks for the feedback. (compliance check delay)
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GBBA
Aug 4, 2015 18:48:21 GMT
Post by badger on Aug 4, 2015 18:48:21 GMT
On Manual fund and Green fund, my dashboard tells me amounts Awaiting Investment + Currently Invested + Total Investment
I put a few hundred into GBBA yesterday, but dashboard just shows Total Investment. I know it's all invested, as if I click "adjust investment" it tells my how much is invested. Why can't it show on the dashboard the same as the other 2 accounts?
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jonah
Member of DD Central
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GBBA
Aug 4, 2015 20:09:46 GMT
Post by jonah on Aug 4, 2015 20:09:46 GMT
How does the GBBA rate verses manual targets on either loans when they go onto the market or when people are looking to reduce their manual holdings? I'm meaning in the case where total demand is greater than the supply of entry in a loan?
I've seen the comments on manual vs manual but wondered how GBBA played into the mix.
I'm assuming that overtime it will start to sweep up all the odd bits of loans, reducing the amount showing as available on the main loans page.
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GBBA
Aug 4, 2015 22:20:35 GMT
Post by chris on Aug 4, 2015 22:20:35 GMT
On Manual fund and Green fund, my dashboard tells me amounts Awaiting Investment + Currently Invested + Total Investment
I put a few hundred into GBBA yesterday, but dashboard just shows Total Investment. I know it's all invested, as if I click "adjust investment" it tells my how much is invested. Why can't it show on the dashboard the same as the other 2 accounts? It's been that way since the new dashboard launched. There's a small tweak to the layout coming in the next couple of weeks to tidy up those boxes somewhat, and once that's live I'm planning to formally review the entire dashboard screen and see what improvements can be made to make it more consistent and easier to use.
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