sl75
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Post by sl75 on Sept 16, 2015 10:34:39 GMT
... Everything is now in place to make it happen and the pipeline is building nicely. We've been told the pipeline is building nicely for many months now, but it currently seems to have a major blockage. What is blocking it? Are there any tools IT can provide to facilitate the "unblockers" in their job? Conversely, is the problem that IT has been giving the "unblockers" too many new and unfamiliar tools to use, when all they really needed was a metaphorical plunger?
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Post by chris on Sept 16, 2015 10:40:22 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. We're going to have to agree to disagree. We're trying to do what is best for everyone - the business, lenders and borrowers. Within lenders you also have time rich / time poor and knowledge rich / knowledge poor. It's a balancing act that includes borrower origination and I've set out how we've tried to balance things as there are more interests we need to look after than just the MLIA, as important as it is. If that balance doesn't work for you then you have the option to invest elsewhere - we believe we still have the most attractive lender proposition in the market subject to deal flow. Every single business is, to one degree or another, a live experiment on their customers. We're all constantly tweaking things like cashback offers, rates, how our market works, etc. Some are just more open about the various levers. If I'd never mentioned prioritisation then we wouldn't be having this conversation and I'm sure you don't want me to be more closed about how the platform works in order to protect ourselves from those who disagree with our choices. The amount the platform earns from an investor in the GEIA and GBBA vs MLIA are precisely the same. As the accounts grow so does the 5% cap on the provision fund so long term we may make a bit extra but that is only when growth in those accounts is slower than the growth in the PF. If the PF is growing rapidly it will be because of good management of our loan book which is also in your interests. Thus for all intents and purposes in even the mid term our margin remains the same. MLIA can still trade for free, remember, whereas that isn't even possible on some other platforms. What those accounts can also do is reduce borrower rates in some classes of loans by increasing demand, and that in turn increases our ability to originate new loans. MLIA will still take the bulk of most loans as and when they draw down. The market is now just biased in some loans towards that so that after draw down the automatic accounts will take some priority. Actions do speak louder than words and that's why it's up to us to deliver deal flow. These changes support us doing just that.
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Post by chris on Sept 16, 2015 10:41:17 GMT
... Everything is now in place to make it happen and the pipeline is building nicely. We've been told the pipeline is building nicely for many months now, but it currently seems to have a major blockage. What is blocking it? Are there any tools IT can provide to facilitate the "unblockers" in their job? Conversely, is the problem that IT has been giving the "unblockers" too many new and unfamiliar tools to use, when all they really needed was a metaphorical plunger? IT hasn't been the issue.
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Post by chris on Sept 16, 2015 10:44:20 GMT
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? Currently yes the stagnant funds locked in a defaulted loan remain at the bottom of the pile so if everyone tried to exit the account the last to leave would be stuck unable to withdraw their holdings, whereas at the front of the queue liquidity remains. Remember though that there is a provision fund in place, with the intention to grow it rapidly, that aids by covering that situation.
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bg
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Post by bg on Sept 16, 2015 11:07:41 GMT
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? Currently yes the stagnant funds locked in a defaulted loan remain at the bottom of the pile so if everyone tried to exit the account the last to leave would be stuck unable to withdraw their holdings, whereas at the front of the queue liquidity remains. Remember though that there is a provision fund in place, with the intention to grow it rapidly, that aids by covering that situation. That is a massive worry for me..
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bigfoot12
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Post by bigfoot12 on Sept 16, 2015 11:25:07 GMT
Currently yes the stagnant funds locked in a defaulted loan remain at the bottom of the pile so if everyone tried to exit the account the last to leave would be stuck unable to withdraw their holdings, whereas at the front of the queue liquidity remains. Remember though that there is a provision fund in place, with the intention to grow it rapidly, that aids by covering that situation. That is a massive worry for me.. Me too.
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mikes1531
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Post by mikes1531 on Sept 16, 2015 11:31:44 GMT
The amount the platform earns from an investor in the GEIA and GBBA vs MLIA are precisely the same. As the accounts grow so does the 5% cap on the provision fund so long term we may make a bit extra but that is only when growth in those accounts is slower than the growth in the PF. If the PF is growing rapidly it will be because of good management of our loan book which is also in your interests. Thus for all intents and purposes in even the mid term our margin remains the same. : Perhaps AC's thinking has changed recently, but the above is contrary to what I got out of the discussion of the PF when it first was introduced for the GEIA. Then, AC stated that the difference between the 7% GEIA rate and the rates on the component loans would go into the PF until it had built up to the 5% level. Once that happened, any further differential interest would go to AC. (I'm ignoring the initial £50k AC put into the PF to get it started, as that was just a loan by AC to the PF.) If the average rate on the GEIA components is 9.75%, then AC will make more from investors in the GEIA than they would if those same investors used the MLIA as long as losses due to defaults are less than 2.75% p.a. My own assessment at the time was -- and still is now -- that default losses on those loans would be less than 2.75% p.a., so I've continued to invest via my MLIA (except for a token GEIA investment to see how that worked). Other investors might have opted for the GEIA because they expected losses to be greater than 2.75% p.a., or because they'd sleep better at night not having to worry much about defaults. That's for them to decide and, AIUI, enough have done so that there's a significant balance invested in GEIAs. I have no problem with this arrangement, but I do think that the GEIA -- and the GBBA -- will be adding to AC's bottom line. (And I'm particularly happy with that because I'm going to be an AC shareholder via the Seedrs fundraising.)
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mikes1531
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Post by mikes1531 on Sept 16, 2015 11:34:40 GMT
That is a massive worry for me.. Me too. , bigfoot12: Why? Do you expect there will be so many defaults that the PF will be overwhelmed?
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SteveT
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Post by SteveT on Sept 16, 2015 11:34:59 GMT
Currently yes the stagnant funds locked in a defaulted loan remain at the bottom of the pile so if everyone tried to exit the account the last to leave would be stuck unable to withdraw their holdings, whereas at the front of the queue liquidity remains. Remember though that there is a provision fund in place, with the intention to grow it rapidly, that aids by covering that situation. That is a massive worry for me.. Really? And yet you still invest in other P2P loans? How do you sleep at night? Strikes me that the scenario Chris outlines is pretty far-fetched, at least versus other P2P loss possibilities. But if this serves to reinforce that the QAA is NOT the same thing as an FSCS-protected bank savings account and so keeps some of the DART money away, that's fine by me.
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Post by chris on Sept 16, 2015 11:38:10 GMT
The amount the platform earns from an investor in the GEIA and GBBA vs MLIA are precisely the same. As the accounts grow so does the 5% cap on the provision fund so long term we may make a bit extra but that is only when growth in those accounts is slower than the growth in the PF. If the PF is growing rapidly it will be because of good management of our loan book which is also in your interests. Thus for all intents and purposes in even the mid term our margin remains the same. : Perhaps AC's thinking has changed recently, but the above is contrary to what I got out of the discussion of the PF when it first was introduced for the GEIA. Then, AC stated that the difference between the 7% GEIA rate and the rates on the component loans would go into the PF until it had built up to the 5% level. Once that happened, any further differential interest would go to AC. (I'm ignoring the initial £50k AC put into the PF to get it started, as that was just a loan by AC to the PF.) If the average rate on the GEIA components is 9.75%, then AC will make more from investors in the GEIA than they would if those same investors used the MLIA as long as losses due to defaults are less than 2.75% p.a. My own assessment at the time was -- and still is now -- that default losses on those loans would be less than 2.75% p.a., so I've continued to invest via my MLIA (except for a token GEIA investment to see how that worked). Other investors might have opted for the GEIA because they expected losses to be greater than 2.75% p.a., or because they'd sleep better at night not having to worry much about defaults. That's for them to decide and, AIUI, enough have done so that there's a significant balance invested in GEIAs. I have no problem with this arrangement, but I do think that the GEIA -- and the GBBA -- will be adding to AC's bottom line. (And I'm particularly happy with that because I'm going to be an AC shareholder via the Seedrs fundraising.) That assumes static size of the loan book. If the loan book is £2m this month for that account then 5% of that is £100k. If that rises to £3m next month then suddenly we need another £50k in the PF which represents several months of interest margin. Thus at this early stage it's relatively easy for growth to out strip the 2.75% pa margin, and indeed we're looking at budgeting for further injections of cash into the PF to keep it topped up if growth does continue to accelerate. So your argument and original thinking remains valid but only in the longer term as I understand it.
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Post by meledor on Sept 16, 2015 11:46:13 GMT
Getting back on track, I don't think it's just a case of poor deal flow. The thing has got so complicated that we seem to spend most of the time on this forum discussing the mechanics and interaction of these funds (GBBA MLIA etc) rather than the loans themselves - not a good advert I'd have thought.
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bigfoot12
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Post by bigfoot12 on Sept 16, 2015 11:53:51 GMT
bg, bigfoot12: Why? Do you expect there will be so many defaults that the PF will be overwhelmed? How big is the provision fund? If you answer that I will have a go at answering your question. It is aiming for 5%, but what is now? Are the exposures to each of the funds ring-fenced? Really? And yet you still invest in other P2P loans? How do you sleep at night? Strikes me that the scenario Chris outlines is pretty far-fetched, at least versus other P2P loss possibilities. But if this serves to reinforce that the QAA is NOT the same thing as an FSCS-protected bank savings account and so keeps some of the DART money away, that's fine by me. Next time AC has a loan defaulting, especially if it is a recently issued loan I will withdraw all my money from the QAA and then ask does the QAA own any of it. Others might do the same. If the answer is "yes", or "won't say" then I would expect more people to exit the QAA. If the problem loan is one like the Plumber (ie large and recent) the share owned by the fund might exceed the provision fund - we don't know because nobody will say how it works. I am happy to take the risk that that might happen, but not once I know it has happened. SteveT will you really put money into a fund which you know has a problem loan in it without accepting any sort of price discount? Should anyone lose money which went into the QAA after one or more of the defaults which caused the loss I would expect them to complain loudly.
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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 16, 2015 11:56:03 GMT
chris, I'm putting the breakfast analogy to one side, and coming straight to the point. I think the GBBA is a great idea, but why does it need to invest in loans of 12% or above ? Loans #74 and #152 are actually paying default interest, but they are included in the GBBA, simply because they haven't been subjected to monitoring event. Yet every month they get reviewed. Large loans paying c.10% are ideal for the GBBA but it sends out the wrong message when small and medium sized loans of 12% are included. It's an easy fix.
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SteveT
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Post by SteveT on Sept 16, 2015 11:56:18 GMT
bg, bigfoot12: Why? Do you expect there will be so many defaults that the PF will be overwhelmed? How big is the provision fund? If you answer that I will have a go at answering your question. It is aiming for 5%, but what is now? Are the exposures to each of the funds ring-fenced? Really? And yet you still invest in other P2P loans? How do you sleep at night? Strikes me that the scenario Chris outlines is pretty far-fetched, at least versus other P2P loss possibilities. But if this serves to reinforce that the QAA is NOT the same thing as an FSCS-protected bank savings account and so keeps some of the DART money away, that's fine by me. Next time AC has a loan defaulting, especially if it is a recently issued loan I will withdraw all my money from the QAA and then ask does the QAA own any of it. Others might do the same. If the answer is "yes", or "won't say" then I would expect more people to exit the QAA. If the problem loan is one like the Plumber (ie large and recent) the share owned by the fund might exceed the provision fund - we don't know because nobody will say how it works. I am happy to take the risk that that might happen, but not once I know it has happened. SteveT will you really put money into a fund which you know has a problem loan in it without accepting any sort of price discount? Should anyone lose money which went into the QAA after one or more of the defaults which caused the loss I would expect them to complain loudly. The QAA banner on the website clearly states "Provision fund aiming for 5% bad debt coverage", which I'm happy to take at face value given my exposure is limited to my idle cash.
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bigfoot12
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Post by bigfoot12 on Sept 16, 2015 11:59:42 GMT
The QAA banner on the website clearly states "Provision fund aiming for 5% bad debt coverage", which I'm happy to take at face value given my exposure is limited to my idle cash. And all morning I've been aiming to stop messing about on this forum and get on with some work...
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