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Post by Butch Cassidy on Sept 15, 2015 9:01:43 GMT
Am I missing something but AC seems to be becoming a pyramid scheme offering 10-15% loans but making them virtually unobtainable by using opaque algorithms to hoover them all up & reissue them through bespoke accounts for 7% or cash accounts for 3.75%. Now I appreciate that some risk averse investors will want a lower rate in exchange for the comfort of a provision fund or replacing their BS savings account & these type of investors will provide a major source of funding growth going forward but why are MLIA investors being disadvantaged to accommodate them? What level of handicapping is acceptable? Until these developments it was possible to reinvest monthly income in existing loans no problem, albeit with random allocations, but now only the odd £1 of shrapnel every few days is invested. I doubt levels of churn have changed very much so these new accounts & the associated weighted algorithms must be the main cause. We can all accept that increased deal flow would help but how often have we been promised that & I accept that the actual workings of these accounts & the loan distribution is commercially sensitive but all I want to know is how unfairly are manual investor being treated? Pricing loans to risk is all very good unless you miscalculate & loans that still remain unsold upto a year after drawdown may fall into that category, the market clearly doesn’t agree with the initial pricing, so let these accounts absorb those units but why allow them to suck in all the other desirable units on more favourable terms than MLIA lenders? andrewholgate? |
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sqh
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Before P2P, savers put a guinea in a piggy bank, now they smash the banks to become guinea pigs.
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Post by sqh on Sept 15, 2015 9:44:50 GMT
Am I missing something but AC seems to be becoming a pyramid scheme offering 10-15% loans but making them virtually unobtainable by using opaque algorithms to hoover them all up & reissue them through bespoke accounts for 7% or cash accounts for 3.75%. Now I appreciate that some risk averse investors will want a lower rate in exchange for the comfort of a provision fund or replacing their BS savings account & these type of investors will provide a major source of funding growth going forward but why are MLIA investors being disadvantaged to accommodate them? What level of handicapping is acceptable? Until these developments it was possible to reinvest monthly income in existing loans no problem, albeit with random allocations, but now only the odd £1 of shrapnel every few days is invested. I doubt levels of churn have changed very much so these new accounts & the associated weighted algorithms must be the main cause. We can all accept that increased deal flow would help but how often have we been promised that & I accept that the actual workings of these accounts & the loan distribution is commercially sensitive but all I want to know is how unfairly are manual investor being treated? Pricing loans to risk is all very good unless you miscalculate & loans that still remain unsold upto a year after drawdown may fall into that category, the market clearly doesn’t agree with the initial pricing, so let these accounts absorb those units but why allow them to suck in all the other desirable units on more favourable terms than MLIA lenders? andrewholgate? I totally agree. Loans with an interest of 12% or above should be excluded from the GBBA. Loan #74 is paying 18% and is technically in default, but it's alright for the GBBA. Loan #123 is paying 11% and excluded from the GBBA because it's making payments from a buffer. Technically it's in surplus. It's nonsense and is getting MLIA lenders annoyed. andrewholgate, please address this urgently.
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am
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Post by am on Sept 15, 2015 10:05:36 GMT
Pyramid scheme has a specific meaning. What you describe is not a pyramid scheme.
If you were being ungenerous you could describe what's happening as a de facto bait and switch, but for that to be true it would have to be easier to make new investments into the GEIA/GBBA than the MLIA, and I'm not aware that has been demonstrated to be the case.
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webwiz
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Post by webwiz on Sept 15, 2015 10:07:11 GMT
Am I missing something but AC seems to be becoming a pyramid scheme offering 10-15% loans but making them virtually unobtainable by using opaque algorithms to hoover them all up & reissue them through bespoke accounts for 7% or cash accounts for 3.75%. Now I appreciate that some risk averse investors will want a lower rate in exchange for the comfort of a provision fund or replacing their BS savings account & these type of investors will provide a major source of funding growth going forward but why are MLIA investors being disadvantaged to accommodate them? What level of handicapping is acceptable? Until these developments it was possible to reinvest monthly income in existing loans no problem, albeit with random allocations, but now only the odd £1 of shrapnel every few days is invested. I doubt levels of churn have changed very much so these new accounts & the associated weighted algorithms must be the main cause. We can all accept that increased deal flow would help but how often have we been promised that & I accept that the actual workings of these accounts & the loan distribution is commercially sensitive but all I want to know is how unfairly are manual investor being treated? Pricing loans to risk is all very good unless you miscalculate & loans that still remain unsold upto a year after drawdown may fall into that category, the market clearly doesn’t agree with the initial pricing, so let these accounts absorb those units but why allow them to suck in all the other desirable units on more favourable terms than MLIA lenders? andrewholgate? This may be a temporary thing. AC had to reserve a number of loans for the QAA in order to launch it. Unless they decide to increase the QAA cap new loans should be available for MLIA now that the QAA is fully funded. In retrospect it might have been better for AC to have had two QAA schemes, one on a different platform for investors not planning to move their funds from QAA into another AC account (although of course they always could if they changed their mind) and another on the current platform from which cash could not be withdrawn.
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Post by Butch Cassidy on Sept 15, 2015 10:24:38 GMT
Pyramid scheme has a specific meaning. What you describe is not a pyramid scheme. If you were being ungenerous you could describe what's happening as a de facto bait and switch, but for that to be true it would have to be easier to make new investments into the GEIA/GBBA than the MLIA, and I'm not aware that has been demonstrated to be the case. Il moro quoted:
Chris implied here & here that priority would be given to the investment accounts like the GBBA over the MLIA, but not sure if this has been implemented yet
Currently GBBA has no priority but that will be changing with the next software release whereby investment accounts will be given some level of priority, but that will be balanced by the MLIA having discounts (and possibly premiums). All trades will still happen in the same marketplace it's just the products will get a greater share of sales and purchases at par. Exact weighting to be determined, and will likely be tweaked as we see real world usage to make sure that MLIA retains reasonable liquidity even at par. The algorithm is currently being rewritten for release in the next couple of weeks so not much point documenting it as is.
I agree every aspect of this is being made unclear/uncertain (commercial sensitivity argument) but there is enough circumstantial evidence on other threads to reach a fairly certain conclusion that MLIA investors are at best being shuffled out by excess demand or more likely deliberately disadvantaged by the algorithm. Pyramid in the sense of higher rates for the few, unobtainable by the many, who are then left with the same underlying loans for a lower rate but I agree it does have a specific other meaning & may not have been the best choice of terminology.
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Post by chris on Sept 16, 2015 8:25:23 GMT
I do find it amusing at times on this forum. I've got one thread saying the GBBA is useless as it can't deploy funds and another thread accusing the GBBA / GEIA of ruining the party for the MLIA and being a pyramid scheme which is not the right phrase at all. The simple problem in both cases is current limited supply of loans something the other directors are working very hard on resolving, with these changes being a small part in that plan to increase the volume of loans we can source.
Yes as previously mentioned there is a bias now towards the automatic accounts when it comes to both buying and selling, and is designed to help with their different activity profile. Both the GBBA and GEIA tend to get a steady stream of investment whereas the MLIA spikes much more around loan drawdown times. MLIA is the only account that can buy at a premium or sell at a discount / premium. GBBA / GEIA exposure in any given loan is limited to a percentage of the portfolio and can only be funded at drawdown if there is a weight of cash awaiting deployment (a situation we're aiming to avoid in the near future) otherwise they're left buying in on the open market. That's okay if there is more underwritten loan than MLIA demand but less ideal otherwise.
We're considering other ideas to help smooth GEIA / GBBA deployment of funds such as reserving a portion of new loans for sale to the accounts, in which case priority in the open market may no longer be needed. But we need to see solutions in action before we can know for sure exactly how they will work as no amount of modelling or simulation can account for human behaviour.
At the moment it's a roughly 2/3rds vs 1/3rd split on sales and purchases in favour of the automatic accounts, but that is then obviously weighted by demand so that if there isn't much demand from those accounts it swings far more in favour of the MLIA. Underwriters are also given priority of sale for loan units held in their compulsory sale account where we expect 80% of the volume of sales to go to underwriters and 20% to lenders if there are sufficient lender sales. If lenders don't have anything for sale then it'll go 100% to underwriters and vice versa. QAA takes priority over all and if the QAA needs to make a loan sale then it takes priority over all.
As we understand real world usage we'll tweak those biases to keep things balanced. MLIA is important to us, it's my personal primary method of investing, and it has some unique tools in the marketplace that the other accounts cannot access.
Most importantly we need to get loan volumes back up to where they should be and that will ease any concerns you may have over the prioritisation as there'll be plenty for sale to all.
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bg
Member of DD Central
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Post by bg on Sept 16, 2015 8:38:39 GMT
I do find it amusing at times on this forum. I've got one thread saying the GBBA is useless as it can't deploy funds and another thread accusing the GBBA / GEIA of ruining the party for the MLIA and being a pyramid scheme which is not the right phrase at all. The simple problem in both cases is current limited supply of loans something the other directors are working very hard on resolving, with these changes being a small part in that plan to increase the volume of loans we can source. Yes as previously mentioned there is a bias now towards the automatic accounts when it comes to both buying and selling, and is designed to help with their different activity profile. Both the GBBA and GEIA tend to get a steady stream of investment whereas the MLIA spikes much more around loan drawdown times. MLIA is the only account that can buy at a premium or sell at a discount / premium. GBBA / GEIA exposure in any given loan is limited to a percentage of the portfolio and can only be funded at drawdown if there is a weight of cash awaiting deployment (a situation we're aiming to avoid in the near future) otherwise they're left buying in on the open market. That's okay if there is more underwritten loan than MLIA demand but less ideal otherwise. We're considering other ideas to help smooth GEIA / GBBA deployment of funds such as reserving a portion of new loans for sale to the accounts, in which case priority in the open market may no longer be needed. But we need to see solutions in action before we can know for sure exactly how they will work as no amount of modelling or simulation can account for human behaviour. At the moment it's a roughly 2/3rds vs 1/3rd split on sales and purchases in favour of the automatic accounts, but that is then obviously weighted by demand so that if there isn't much demand from those accounts it swings far more in favour of the MLIA. Underwriters are also given priority of sale for loan units held in their compulsory sale account where we expect 80% of the volume of sales to go to underwriters and 20% to lenders if there are sufficient lender sales. If lenders don't have anything for sale then it'll go 100% to underwriters and vice versa. QAA takes priority over all and if the QAA needs to make a loan sale then it takes priority over all. As we understand real world usage we'll tweak those biases to keep things balanced. MLIA is important to us, it's my personal primary method of investing, and it has some unique tools in the marketplace that the other accounts cannot access. Most importantly we need to get loan volumes back up to where they should be and that will ease any concerns you may have over the prioritisation as there'll be plenty for sale to all. Completely agree...the lack of loans is the source of 95% of the gripes. It doesn't matter how loans are allocated if there aren't any being originated. Only thing I would point out is the lack of information on what the QAA does and how it invests does leave it open to accusations of being some sort of pyramid/ponzi/Stanford scheme. People like to know what their funds are being used for. As it stands, the perception could be that defaults could be ignored and withdrawals met by new money, with profit taken off the top. I think it's a bit of a worry.
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jonah
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Post by jonah on Sept 16, 2015 8:38:55 GMT
Thanks chris . I especially like that last sentence. |
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sl75
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Post by sl75 on Sept 16, 2015 9:33:10 GMT
We're considering other ideas to help smooth GEIA / GBBA deployment of funds such as reserving a portion of new loans for sale to the accounts, in which case priority in the open market may no longer be needed. But we need to see solutions in action before we can know for sure exactly how they will work as no amount of modelling or simulation can account for human behaviour. Much as it is clear that you love tinkering with the systems, the deal flow is the big issue here. Consider AC as being analogous to the kitchen and serving area of a breakfast buffet... Most people want a decent variety of stuff in their breakfast. Some will go exclusively for hot food, some exclusively for cold food, some for meats, some for grains, some for fruit juice, some for hot drinks, etc. ... and some will want a good mix of all of these. Complaints are reaching the kitchen that the serving plates are emptying out quickly, so people can't get the mix they want. So they rope of a section of the restaurant for the "Great British Breakfast Area" - here it is promised that you'll be delivered a delicious breakfast with at least 5 items from the menu (and more if possible). However, soon the staff who are plating up the plates for delivery to the GBBA find they are running into the same problem as the people who are picking out their own breakfast items - many of the serving dishes are empty, and when new ones get delivered, they are almost instantly devoured by many hungry customers who had still not had enough for their breakfast (but already had as much as they wanted of the items that are still available). The restaurant manager then proposes that a portion of the output from the kitchen should be reserved for the GBBA. However, this still won't fix the problem - the problem is that the kitchen is simply not delivering enough food for the customers! Fix that, and there'll be plenty of different serving dishes to choose from for newcomers, as previous customers will already have had their fill, and not be hungry for as much of whatever next comes out of the kitchen as they can get... Indeed, someone who just filled up their entire plate with bacon, because it was the only hot food available, might actually put back some of the bacon and take some sausages if the kitchen sent some out, allowing several more people to have a sausage and a piece of bacon! Once the eggs, muesli, ham, cheese, salad, mushrooms, french toast, hash browns, tomatoes, croissants, toast, jam, marmalade, etc... that the kitchen have been saying will be sent out soon actually get delivered to the serving area, everyone who is already in the restaurant will be able to have their fill, and the kitchen then needs to keep stuff coming, fast enough that the GBBA customers can each be given a nutritious and balanced plateful on arrival - maybe with 20 items typical, and 5 just being a fallback when the kitchen has been a bit slow lately. Meanwhile some Faster Chefs in another establishment have been preparing so many breakfast items (albeit ones that the Awesome Chefs at this restaurant would consider inferior) that their customers have a menu of thousands of items to choose from in the serving area, with the opportunity to reserve a portion of dozens of similar items that are at this moment being prepared in the kitchen. [I'll not push this analogy much further, to avoid delving into discussions about food hygiene when returning items to the serving area, or regurgitated food... but you get the idea] Is there anything you can do to help the "kitchen staff" prepare the "food" faster? If so, you'd probably be more productive doing that, rather than creating ever-more-clever ways of dividing out the inadequate food supply that is making it to the serving area! Edit: it is a lot easier for us customers to comment on the deficiencies we can see in the serving area [e.g. complaining about the guy who we saw taking an entire plateful of bacon!], while we wait for our food, but the deficiencies in the kitchen need attention - are they having trouble getting "ingredients"? Do suppliers of quality foodstuffs have trouble getting them into the delivery area? are the chefs missing some tools that would help them prepare the food faster? what can be done to speed up the process from the moment a new batch of supplies arrives in the kitchen to when it gets to the table as a fully prepared dish?
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jonah
Member of DD Central
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Post by jonah on Sept 16, 2015 9:50:12 GMT
Pure genius.
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Post by pepperpot on Sept 16, 2015 10:09:44 GMT
I think with the kitchen so bare, someone has had to rely on coffee this morning.
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Post by Butch Cassidy on Sept 16, 2015 10:11:37 GMT
I do find it amusing at times on this forum. I've got one thread saying the GBBA is useless as it can't deploy funds and another thread accusing the GBBA / GEIA of ruining the party for the MLIA and being a pyramid scheme which is not the right phrase at all. The simple problem in both cases is current limited supply of loans something the other directors are working very hard on resolving, with these changes being a small part in that plan to increase the volume of loans we can source.. We have heard this same tune for months, as pointed out on another thread by Samford71 you are woefully behind on your forecast volumes & there is no sign this will be solved at anytime soon, so instead of making the situation worse especially for MLIA, by hoovering up the limited availability of current loans, why not allow the bespoke/cash accounts to buy loans such as #45 Leeds where there is a significant supply available? Investors want to be certain they are being treated fairly & what AC are risking their money on, personally I can't see why that is such a surprise? Yes as previously mentioned there is a bias now towards the automatic accounts when it comes to both buying and selling, and is designed to help with their different activity profile. Both the GBBA and GEIA tend to get a steady stream of investment whereas the MLIA spikes much more around loan drawdown times. MLIA is the only account that can buy at a premium or sell at a discount / premium. GBBA / GEIA exposure in any given loan is limited to a percentage of the portfolio and can only be funded at drawdown if there is a weight of cash awaiting deployment (a situation we're aiming to avoid in the near future) otherwise they're left buying in on the open market. That's okay if there is more underwritten loan than MLIA demand but less ideal otherwise.. Still doesn't answer WHY MLIA investors should be effectively excluded from the open market to the benefit of bespoke accounts? We're considering other ideas to help smooth GEIA / GBBA deployment of funds such as reserving a portion of new loans for sale to the accounts, in which case priority in the open market may no longer be needed. But we need to see solutions in action before we can know for sure exactly how they will work as no amount of modelling or simulation can account for human behaviour.. Live testing with investors funds isn't the best way to find out what is a good idea & if it works in practise or not IMO, see the recent roll back for evidence. At the moment it's a roughly 2/3rds vs 1/3rd split on sales and purchases in favour of the automatic accounts, but that is then obviously weighted by demand so that if there isn't much demand from those accounts it swings far more in favour of the MLIA. Underwriters are also given priority of sale for loan units held in their compulsory sale account where we expect 80% of the volume of sales to go to underwriters and 20% to lenders if there are sufficient lender sales. If lenders don't have anything for sale then it'll go 100% to underwriters and vice versa. QAA takes priority over all and if the QAA needs to make a loan sale then it takes priority over all. As we understand real world usage we'll tweak those biases to keep things balanced. MLIA is important to us, it's my personal primary method of investing, and it has some unique tools in the marketplace that the other accounts cannot access.. The point is you are creating demand for the bespoke accounts by biasing the availability of loans in their favour, most MLIA accounts would prefer to hold a loan of 10-15% directly & accept the full risk but they are being denied that chance & having to invest spare cash into bespoke/cash account to gain any return (which is higher than 0% on uninvested cash) & in effect holding those same loans but for a much lower return which appears unfair. Most importantly we need to get loan volumes back up to where they should be and that will ease any concerns you may have over the prioritisation as there'll be plenty for sale to all. We all want that but actions speak louder than words.
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Post by chris on Sept 16, 2015 10:13:35 GMT
Only thing I would point out is the lack of information on what the QAA does and how it invests does leave it open to accusations of being some sort of pyramid/ponzi/Stanford scheme. People like to know what their funds are being used for. As it stands, the perception could be that defaults could be ignored and withdrawals met by new money, with profit taken off the top. I think it's a bit of a worry. I'll see if we can publish a "funds in defaulted loans" figure or similar. It's zero at the moment and the intention is to keep it that way although that can't be guaranteed.
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bigfoot12
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Post by bigfoot12 on Sept 16, 2015 10:21:34 GMT
Only thing I would point out is the lack of information on what the QAA does and how it invests does leave it open to accusations of being some sort of pyramid/ponzi/Stanford scheme. People like to know what their funds are being used for. As it stands, the perception could be that defaults could be ignored and withdrawals met by new money, with profit taken off the top. I think it's a bit of a worry. I'll see if we can publish a "funds in defaulted loans" figure or similar. It's zero at the moment and the intention is to keep it that way although that can't be guaranteed. I think that the question is if a loan defaults are the current QAA investors allowed to exit their share of it. Suppose I invest £1,000 in the QAA and the fund has 1% in a loan which defaults. Am I able to pull my full £1,000 out, or only £990 (with £10 in my share of the problem loan)? At some point the provision fund will kick in and cover my £10, but will that be straight away or at a much later date as seems to be the case with the GEIA. After I have pulled my £990 or £1,000, bg puts in £1,000. Does he get allocated any of the problem loan or is that now ring fenced?
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Post by chris on Sept 16, 2015 10:25:02 GMT
We're considering other ideas to help smooth GEIA / GBBA deployment of funds such as reserving a portion of new loans for sale to the accounts, in which case priority in the open market may no longer be needed. But we need to see solutions in action before we can know for sure exactly how they will work as no amount of modelling or simulation can account for human behaviour. Much as it is clear that you love tinkering with the systems, the deal flow is the big issue here. Consider AC as being analogous to the kitchen and serving area of a breakfast buffet... Most people want a decent variety of stuff in their breakfast. Some will go exclusively for hot food, some exclusively for cold food, some for meats, some for grains, some for fruit juice, some for hot drinks, etc. ... and some will want a good mix of all of these. Complaints are reaching the kitchen that the serving plates are emptying out quickly, so people can't get the mix they want. So they rope of a section of the restaurant for the "Great British Breakfast Area" - here it is promised that you'll be delivered a delicious breakfast with at least 5 items from the menu (and more if possible). However, soon the staff who are plating up the plates for delivery to the GBBA find they are running into the same problem as the people who are picking out their own breakfast items - many of the serving dishes are empty, and when new ones get delivered, they are almost instantly devoured by many hungry customers who had still not had enough for their breakfast (but already had as much as they wanted of the items that are still available). The restaurant manager then proposes that a portion of the output from the kitchen should be reserved for the GBBA. However, this still won't fix the problem - the problem is that the kitchen is simply not delivering enough food for the customers! Fix that, and there'll be plenty of different serving dishes to choose from for newcomers, as previous customers will already have had their fill, and not be hungry for as much of whatever next comes out of the kitchen as they can get... Indeed, someone who just filled up their entire plate with bacon, because it was the only hot food available, might actually put back some of the bacon and take some sausages if the kitchen sent some out, allowing several more people to have a sausage and a piece of bacon! Once the eggs, muesli, ham, cheese, salad, mushrooms, french toast, hash browns, tomatoes, croissants, toast, jam, marmalade, etc... that the kitchen have been saying will be sent out soon actually get delivered to the serving area, everyone who is already in the restaurant will be able to have their fill, and the kitchen then needs to keep stuff coming, fast enough that the GBBA customers can each be given a nutritious and balanced plateful on arrival - maybe with 20 items typical, and 5 just being a fallback when the kitchen has been a bit slow lately. Meanwhile some Faster Chefs in another establishment have been preparing so many breakfast items (albeit ones that the Awesome Chefs at this restaurant would consider inferior) that their customers have a menu of thousands of items to choose from in the serving area, with the opportunity to reserve a portion of dozens of similar items that are at this moment being prepared in the kitchen. [I'll not push this analogy much further, to avoid delving into discussions about food hygiene when returning items to the serving area, or regurgitated food... but you get the idea] Is there anything you can do to help the "kitchen staff" prepare the "food" faster? If so, you'd probably be more productive doing that, rather than creating ever-more-clever ways of dividing out the inadequate food supply that is making it to the serving area! Edit: it is a lot easier for us customers to comment on the deficiencies we can see in the serving area [e.g. complaining about the guy who we saw taking an entire plateful of bacon!], while we wait for our food, but the deficiencies in the kitchen need attention - are they having trouble getting "ingredients"? Do suppliers of quality foodstuffs have trouble getting them into the delivery area? are the chefs missing some tools that would help them prepare the food faster? what can be done to speed up the process from the moment a new batch of supplies arrives in the kitchen to when it gets to the table as a fully prepared dish? In my defence I both opened and closed my comment with the notion that we need deal flow. You're preaching to the converted. My own influence over origination is limited as that is the domain of others. I've been proactively helping wherever I can to ensure that the system is not contributing to any issues and that it is solving them wherever possible. I've also made sure that all levels of the business have the statistics at their fingertips as to how the business is performing in origination and drawdown of loans. At board level nothing is sacred and I've been pushing every other member of the team to deliver and to do so quickly. stuartassetzcapital is now head of all things sales and origination and the key people report directly to him. Everything is now in place to make it happen and the pipeline is building nicely.
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