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Post by westonkevRS on Sept 25, 2015 17:37:10 GMT
"Caveat emptor" and "there's no such thing as a free lunch" aside, without an ability to quantify (and mitigate) platform risk where do you, where do the regulators, and where does this nascent industry draw the line? Of the N percent yield on offer to buy asset X, how much is due to the riskiness of the asset, how much down to the platform looking to grow its business, and how much, if any, due to the riskiness of the platform? Couldn't agree more. It is prudent to try and assess the lending profile, safety nets such as the Provision Fund, and security of loans. However in my honest belief the biggest risk faced by P2P lenders is platform failure and the subsequent run-down of loans. Unfortunately borrowers have a nasty habit of playing hard when they know the primary contact is no longer around, as end individuals are unlikely to chase with collectors, register defaults or go to court. westonkevRS
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webwiz
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Post by webwiz on Sept 25, 2015 17:37:45 GMT
IMO it depends on the cause of the platform failure. If it is a loan or loans gone really bad and the assets do not cove r the liabilities then moral hazard suggests that investors should take a hit, but I would still suggest that another platform volunteers to handle the run down if the failing platform has not made provision, but without any financial input. If the failure is due to other reasons and the loan assets appear to be worth more than the liabilities to investors then a takeover would seem to be in everyone's best interests.
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registerme
Member of DD Central
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Post by registerme on Sept 25, 2015 18:30:43 GMT
To extend my earlier thinking, for my investments, I am happy to assume:-
* market risk
* credit risk
* interest rate risk
* liquidity risk
I am not confident taking the equivalent of additional unbounded, unquantified equity risk based on the platform.
In no other financial market that I can think of are investors asked to carry this risk directly. Equities always assumes the presence of an exchange that those equities can be traded on (even if the bottom has dropped out of the price). Likewise, bond markets assume the presence of the infrastructure to support the valuation and trading of those instruments. Even with regular retail deposits you mitigate some / all of the associated risk because of the FSCS.
Pulling names out of thin air, how does this equity risk compare between Zopa, RateSetter, FC, SS, Thin Cats, Bondora and MoneyThing?
So, to be provocative, and so that I can quantify it, I would like each P2P platform to tell me how much additional yield I am getting because of this, or for them to pay me an additional yield, or for them to give me a slug of equity. It would be wonderful if the UKP2PFA were to encourage this {imagine a sunglasses wearing smiley face here}.
It's not all a one way street, the platforms that do move in this direction will get more, and cheaper funds as a result.........
EDIT: For some reason (my?) Chrome doesn't like the smiley interface on this website, but it does fine with italics etc.
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Post by davee39 on Sept 25, 2015 19:49:49 GMT
The first three platforms you mention are the largest in the market with well publicized private equity backing. It seems likely that the original backers are looking forward to a stock market flotation so I have assumed that they they have the lowest platform risk and they hold my P2P investments. It should not be too difficult to find platforms which are not transparent regarding profitability, asset backing, loan portfolio and growth rate. With 'Yes Secure' no longer trading I think it is fair to say that most investors identified that this was a troubled business. Quite simply, if a platform makes £500 000 of loans in a year and earns a net 10%, that £50 000 income does not cover many of the running costs, and there are zombies out there making less.
The challenge is volume growth and one solution seems to be the property bandwagon.
Previously I have commented on the feeble attempts of a start-up platform to get new customers. Most posters thought the business 'should be supported' and 'deserved a chance'!!! No financial business deserves a chance, they are not charities or mutuals, they exist to make money for their backers. Perhaps some people are attracted by the warm fuzzy feeling they get from an actively engaged official platform representative. The successful businesses will trail blaze and innovate, some smaller platforms will find and exploit niche products but the pale copies do not deserve to succeed and will ultimately succumb.
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registerme
Member of DD Central
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Post by registerme on Sept 25, 2015 20:07:52 GMT
In the main I agree with that. But don't equate size with stability - Lehmans, RBS, WestLB, HBOS, any Irish bank you care to mention, half of the Landesbanks, Enron, and, ahemm, VW. The list is long and inglorious. I am a long way from confident that just because there is significant PE backing / institutional backing for some of the larger players that it makes them less risky as platforms.
But all of that was "equity" risk. If you bought an asset via any of those companies the asset, absent market, credit, liquidity and interest risk would still be yours, and would still be worth the same amount (excusing the Passat parked in your garage).
I don't think that, for the purposes of this forum, it's a discussion about not assuming risk, it's about being aware enough of the risks to be able to make meaningful judgements.
Icesave 8% deposits covered by the FCSC? Sure, didn't you see the risk (and didn't the FCSC?)? Well, no, they didn't, hence why the FCSC stood by it. Back to caveat emptor.
ablerate containers, or SS bridging loans, or.... FC E rated loans (etc) - how much of the return is due to the asset, and how much the platform?
Backers provision of support is not always dependent on the success, or likely success, of the company being backed. A sizeable balance sheet is one thing, knowing that it will be employed something else entirely.
It's a question worth asking, no?
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ribs
Probably not James Marshall
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Post by ribs on Sept 26, 2015 15:05:56 GMT
I don't have a massive amount to offer this thread. But here are some quotes I found on another forum online, which may or may not add to the debate.
The OP seems to know what he/she is talking about:
On the subject of who the P2P company is (emphasis mine):
So it seems some people may have lost everything they have of had invested. Or maybe they'll lose nothing and never know how close they came. Sobering stuff.
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registerme
Member of DD Central
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Post by registerme on Sept 26, 2015 16:03:36 GMT
If we are never to know who it was how can we learn anything from this?
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Post by ablrateandy on Sept 26, 2015 16:08:18 GMT
I think that the main thing that I am learning from this is that There's more P2P forums???
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grahamg
Member of DD Central
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Post by grahamg on Sept 26, 2015 16:49:19 GMT
If under investigation are they still lending ?
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ribs
Probably not James Marshall
Posts: 148
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Post by ribs on Sept 26, 2015 18:06:54 GMT
I think that the main thing that I am learning from this is that There's more P2P forums??? I should've been more clear, my apologies. The forum in question isn't a p2p specific forum, more of a "personal finance" one, which has occasionally touched on P2P lending, along with many other subjects.
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Post by ablrateandy on Sept 26, 2015 18:08:46 GMT
 . Dammit. I was hoping for a new hangout!
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Monetus
Member of DD Central
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Post by Monetus on Sept 26, 2015 18:08:39 GMT
I think that the main thing that I am learning from this is that There's more P2P forums??? I should've been more clear, my apologies. The forum in question isn't a p2p specific forum, more of a "personal finance" one, which has occasionally touched on P2P lending, along with many other subjects. Sounds interesting - care to share?
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Post by mrclondon on Sept 26, 2015 22:01:56 GMT
The more I think about it, the more concerned I'm getting at the way this story is developing. ribs can you PM me with the link to the forum thread from which you quoted. I would like to see the link published on this thread, but first need to satisfy myself from a forum moderator's point of view that that is entirely sensible. A (small) platform failing through market forces is to expected, and not really a major cause for concern. But if the poster that ribs quotes is right that there is potentially fraud involved then it is a very different kettle of fish. If I was a principal at a small p2p platform this evening I would be pretty depressed reading this thread, and worried about the liquidity from lenders until this is fully out in the open. On the otherhand there have been concerns from various p2p platforms that competitors are briefing against them, and using forums to spread malicious rumours. The p2p sector need to be very careful that the silence from those in the know on this platform failure doesn't undermine the wider industry. If any platform representatives are reading this, feel free to PM me with your thoughts.
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bigfoot12
Member of DD Central
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Post by bigfoot12 on Sept 27, 2015 7:55:01 GMT
Original message didn't add anything new and removed at request of paul123 |
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ribs
Probably not James Marshall
Posts: 148
Likes: 151
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Post by ribs on Sept 27, 2015 8:04:16 GMT
The more I think about it, the more concerned I'm getting at the way this story is developing. Yeah, I actually missed the worst quote of all: I think I'm going to bury my money in the garden now... It's worth mentioning that this is one person on a non-p2p forum. He's unverified and might be telling more porkies than David Cameron. People lie on the Internet sometimes.
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. Dammit. I was hoping for a new hangout!
