jonah
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Post by jonah on Dec 8, 2015 21:07:02 GMT
Although I'm not opposed to the suggested "10% of portfolio" limit, I still have to question whether the current system really needs changing to that extent. The last thing SS want is to undermine the platform's ability to fund really big loans quickly; it was only 8-10 weeks ago we were being bribed with cashback to fill 3 large loans. All of the current issues relate to the recent trickle of small loans, which could much more simply be improved by putting in some better pre-funding caps for small loans (eg. <£500k = £10k, £500k-£1m = £20k, £1-2m = £50k). This I agree with. We need to be careful not to throw out the baby with the bathwater here (is that metaphor allowed in the 21st century?). The current problem is that people are gaming the PF amounts and at some point this will exceed levels of reality and someone(s) will come a cropper when the liquidity isn't there. My guess would be either a huge loan or a loan which looks like it might go bad. The timeline for the latter is impossible to predict, the first 'huge' loan has just been removed from the pipeline leaving 4-5m ones which we have seen SS cope with. So, my suggestion is that unlike other platforms issues, whilst this isn't ideal, this isn't quite as burning as some of the discussions seem to be. Therefore a little time could be taken to consider options and implications of those options. If the aim is to reduce the over target to get lesser amounts and trying to balance larger with smaller investors, then some form of cap would be needed. Options would include either 'real cash' on hand or a percentage of previous loans or something else, including a 'minimum' level to let new people get on a platform would seem sensible. Everything discussed to date has focused on variations of the first two here and to be honest I can't think of a solid third option. I considered forcing new money for PF loans, but people would simply sell other parts and move cash off and then on again. One route could be to prevent sales of the new loan for 7 days (suggested earlier) but people would continue to inflate as they do now, sell other parts and then sell any excess 7 days later. No answers seem easy. The issue with 'cash on hand' on the platform is the inability to predict when loans will go live. This is not a criticism of SS, the world they live in, as shown on other platforms, can move in either direction so fixed dates are hard. Having X thousand pounds on a platform for loans which don't have any indication of when they go live seems challenging for new people, irrespective of the size of their wallets. Without cash on hand, real BH's won't be able to build up a decent portfolio quickly enough though. At 10% with a minimum of £1k (suggested earlier) it would take 11 loans (ignoring SM) before a new BH would be able to get more than 1k into a loan. Except due to the current graduations, it would take 15 loans before the 16th would let Ms/Mr BH put in 1500. I suspect that real BH's would be unimpressed with that timeline and look elsewhere. I know that this could be tweaked, but even so, 11 loans completed before being allowed to put £1100 into a loan feels wrong. A fix for that could be to go from 10% to 20%, or from 1k to 5k minimums or similar. The problem with that is that this allows from the bidding inflation from earlier which we are trying to prevent. Something complicated like 20% until you have parts in 20 loans could be considered, but then you really start penalizing people and it is too messy. (Apologies, this seems to be a long post) Ultimately then, I don't think that the 10% + on hand + minimum will work for the BH's of this world. I suspect it would (assuming the 10% was per loan) and the ratios became more rational, work for me though, however I'm not really the person SS should be most concerned about (see below). The real problem that I see is that there is more demand than supply. Fixing that, well another 6 loans on the pipeline should help! The other part of the demand side is that right now there is only 1 way to guarantee parts of a loan...pre funding. The SM is very challenging at best and a joke at worst. Personally I did ok today, but that was the first time I've been able to get parts on the SM since the new site went live. So, given peoples inability to get a loan any other way, they overfill on PF. I really think that solving part of this may be done via improving the ease for people to get parts on the SM and reducing the frustrations there which would reduce the desire for PF bidding. I accept I'm likely in the minority on this one and that some from of portfolio percentage type restriction would carry the day on this forum but I do feel that in the long term that would weaken the appeal of SS to larger investors, which ultimately SS need to help provide a product so that smaller fish like myself can take part in. I do agree that this would only help with part of the over demand issue. If there was some way of enforcing people to bid only amounts which they could actually pay if they had to (either with new cash or other loan parts) that might also reduce demand a little. Those two combined should reduce the current inflation enough that this issue may not become too real. I don't see a great way to enforce people only bidding for amounts that they could pay though, without making it 'cash on hand' which really removes one of the best features of SS. Apologies again for the lengthy post. More thinking required. Short version: This isn't easy / quick to fix. It isn't a burning issue right now though so there is some time to consider it.
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adrianc
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Post by adrianc on Dec 8, 2015 21:17:59 GMT
Although I'm not opposed to the suggested "10% of portfolio" limit, I still have to question whether the current system really needs changing to that extent. The last thing SS want is to undermine the platform's ability to fund really big loans quickly; it was only 8-10 weeks ago we were being bribed with cashback to fill 3 large loans. <applause> The root cause of the problem is that the pipeline is too unpredictable, too erratic. Or, even simpler, a %age of the loan value. You can't pre-fund more than <say> 1% of the loan, and you can't buy past that 1% before draw-down. Let's face it, it's only small loans where the feeding frenzy arises, because people over-pre-fund, giving big down-scaling. 1% of £500k loan is £5k. 1% of £2m loan is £20k. Of course, only SS know how heavily some people have pre-funded, and only SS know hard how some people have sold-down their allocations.
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adrianc
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Post by adrianc on Dec 8, 2015 21:23:39 GMT
the first 'huge' loan has just been removed from the pipeline leaving 4-5m ones which we have seen SS cope with. To date, only one pre-funded loan over £1.4m hasn't been undersubscribed - and that was 92%. One of the two £3m pre-funds was only 40% subscribed, and took quite a while to fully sell. By those metrics, £4m is just as "huge" as £6m.
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mikes1531
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Post by mikes1531 on Dec 8, 2015 22:18:30 GMT
The issue with 'cash on hand' on the platform is the inability to predict when loans will go live. This is not a criticism of SS, the world they live in, as shown on other platforms, can move in either direction so fixed dates are hard. Having X thousand pounds on a platform for loans which don't have any indication of when they go live seems challenging for new people, irrespective of the size of their wallets. IMHO, this is a problem of SS's creation. We should remember that SS set loans live on the platform in advance of their actual need. (That's why SS need to have an indicator on loans as to whether or not they've been drawn down.) And sometimes it takes a while before a loan is drawn down. So ISTM that SS easily could delay setting loans live by a couple days, and they therefore could say a loan is going live at a specific time and thus give people enough time to plan for it. People wanting to increase their SS investments substantially could take the opportunity to deposit funds just in advance of the go live (allocation of pre-funding) so that the proposed 'deficit limited to 10% of portfolio size' doesn't cause them to suffer a reduced allocation. There'd also be a small benefit of this notice for SS. Because SS pay interest from the go live date, this small delay in that date would save them from having to pay a couple days' worth of interest, which would help their bottom line.
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registerme
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Post by registerme on Dec 8, 2015 22:39:38 GMT
The issue with 'cash on hand' on the platform is the inability to predict when loans will go live. This is not a criticism of SS, the world they live in, as shown on other platforms, can move in either direction so fixed dates are hard. Having X thousand pounds on a platform for loans which don't have any indication of when they go live seems challenging for new people, irrespective of the size of their wallets. IMHO, this is a problem of SS's creation. We should remember that SS set loans live on the platform in advance of their actual need. (That's why SS need to have an indicator on loans as to whether or not they've been drawn down.) And sometimes it takes a while before a loan is drawn down. So ISTM that SS easily could delay setting loans live by a couple days, and they therefore could say a loan is going live at a specific time and thus give people enough time to plan for it. People wanting to increase their SS investments substantially could take the opportunity to deposit funds just in advance of the go live (allocation of pre-funding) so that the proposed 'deficit limited to 10% of portfolio size' doesn't cause them to suffer a reduced allocation. There'd also be a small benefit of this notice for SS. Because SS pay interest from the go live date, this small delay in that date would save them from having to pay a couple days' worth of interest, which would help their bottom line. I want to increase my Saving Stream investments substantially. But I want to do it knowingly. I will not simply plump down x quid when a loan appears in the pipeline. I will (or won't) do that when I see the loan docs. Giving people time to plan for it is a good idea. But, when there is no cost to planning for it (ie 0% on your current account, and 0% cost for pre-funding), what's the downside? Particularly given the ravenous nature of the SM at the moment. Information. Planning. Predictability. Clear process. All of the above are eminently achievable by Saving Stream. But there will be "costs" associated with it, from time to being able to agree a loan, to lenders (big hitters or small fish) feeling disenfranchised etc. 1. Provide some sort of managed primary market pipeline. 2. Provide some sort of managed secondary market pipeline. 3. Ban bots. Punitively. I don't think any of the above are unachievable. Neither do I think they will end up as being detrimental to Saving Stream building a lasting client lender base (or borrower base for that matter) - and staying P2P. There was an interesting (and irritating) article in the Economist last week about "fintech" and banks. Apparently RBS is one of the largest P2P lenders in the UK. www.economist.com/news/finance-and-economics/21679478-unlikely-romance-blossoms-love-and-warThe minute I get a sniff of that from Saving Stream, well, I'm off.
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webwiz
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Post by webwiz on Dec 8, 2015 23:34:15 GMT
All of the current issues relate to the recent trickle of small loans, which could much more simply be improved by putting in some better pre-funding caps for small loans (eg. <£500k = £10k, £500k-£1m = £20k, £1-2m = £50k). £500k = £10k means as few as 50 investors, £500k-£1m = £20k means as few as 25 investors, £1-2m = £50k means as few as 20 investors. So I don't see how this would work.
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paulg
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Post by paulg on Dec 8, 2015 23:58:56 GMT
It seems to me that if there is a problem of investors gaming the pre-fund system, then it is a problem of savingstream creation, caused by them changing their pre-funding model at the last moment to a straight % system without actually trying their original "filled from the bottom up" system, in order to appease some "big hitters". It was entirely predictable - and predicted in this forum - that this would lead to ever increasing pre-funding bids, which will increase until we're all pre-funding the same amounts as the so-called big hitters; the irony of which is that the inevitable result will be the big hitters preserving no advantage at all. A simple solution (though not the only one - some of the ideas above are very good), would be to revert to savingstream original design of filling pre-funds from the bottom up, and then there is no advantage at all in pre-funding more than you want. This would have the additional advantage of giving savingstream a fair indication of the level of demand for each loan, which if I remember rightly was one of their stated objectives in introducing pre-funding. |
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mikes1531
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Post by mikes1531 on Dec 9, 2015 2:35:40 GMT
All of the current issues relate to the recent trickle of small loans, which could much more simply be improved by putting in some better pre-funding caps for small loans (eg. <£500k = £10k, £500k-£1m = £20k, £1-2m = £50k). £500k = £10k means as few as 50 investors, £500k-£1m = £20k means as few as 25 investors, £1-2m = £50k means as few as 20 investors. So I don't see how this would work. : Using your logic and the current £250k maximum pre-bid, you'd come up with two investors in a £500k loan, four in a £1M loan, etc., and the system certainly isn't doing that now. So I don't think the proposal is as bad as you might think. The proposal was for pre-funding caps, not investment caps. So for loans like Tuesday's it would stop people putting in £250k pre-funding requests. I haven't a clue how many people put in huge requests, but this proposal might have the effect of reducing total pre-funding from £3-4M to maybe £1-2M. So instead of the allocation factor being 27% for the larger loans and 11% for the small one, they might be more like 40-50% for the larger loans and 20-30% for the small one. Since nobody would be prevented from putting in a pre-funding request, and everyone who put in a pre-bid would receive an allocation, there'd be just as many investors as there are under the current system. All who put in pre-bids Tuesday that were lower than the suggested caps would have ended up with a larger allocation than they did Tuesday, and anyone who put in a pre-bid Tuesday that was higher than the suggested cap would have been limited by the proposal and would have ended up with a smaller allocation than they did Tuesday.
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SteveT
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Post by SteveT on Dec 9, 2015 7:05:00 GMT
£500k = £10k means as few as 50 investors, £500k-£1m = £20k means as few as 25 investors, £1-2m = £50k means as few as 20 investors. So I don't see how this would work. : Using your logic and the current £250k maximum pre-bid, you'd come up with two investors in a £500k loan, four in a £1M loan, etc., and the system certainly isn't doing that now. So I don't think the proposal is as bad as you might think. The proposal was for pre-funding caps, not investment caps. So for loans like Tuesday's it would stop people putting in £250k pre-funding requests. I haven't a clue how many people put in huge requests, but this proposal might have the effect of reducing total pre-funding from £3-4M to maybe £1-2M. So instead of the allocation factor being 27% for the larger loans and 11% for the small one, they might be more like 40-50% for the larger loans and 20-30% for the small one. Since nobody would be prevented from putting in a pre-funding request, and everyone who put in a pre-bid would receive an allocation, there'd be just as many investors as there are under the current system. All who put in pre-bids Tuesday that were lower than the suggested caps would have ended up with a larger allocation than they did Tuesday, and anyone who put in a pre-bid Tuesday that was higher than the suggested cap would have been limited by the proposal and would have ended up with a smaller allocation than they did Tuesday. Precisely! At the moment there is only a £20k cap for loans up to £500k (assuming this still is being applied by savingstream at launch on the new website) and no cap at all above £500k, so some more sensible caps for loans up to £2m can only improve the situation!
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webwiz
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Post by webwiz on Dec 9, 2015 8:14:56 GMT
£500k = £10k means as few as 50 investors, £500k-£1m = £20k means as few as 25 investors, £1-2m = £50k means as few as 20 investors. So I don't see how this would work. : Using your logic and the current £250k maximum pre-bid, you'd come up with two investors in a £500k loan, four in a £1M loan, etc., and the system certainly isn't doing that now. So I don't think the proposal is as bad as you might think. The proposal was for pre-funding caps, not investment caps. So for loans like Tuesday's it would stop people putting in £250k pre-funding requests. I haven't a clue how many people put in huge requests, but this proposal might have the effect of reducing total pre-funding from £3-4M to maybe £1-2M. So instead of the allocation factor being 27% for the larger loans and 11% for the small one, they might be more like 40-50% for the larger loans and 20-30% for the small one. Since nobody would be prevented from putting in a pre-funding request, and everyone who put in a pre-bid would receive an allocation, there'd be just as many investors as there are under the current system. All who put in pre-bids Tuesday that were lower than the suggested caps would have ended up with a larger allocation than they did Tuesday, and anyone who put in a pre-bid Tuesday that was higher than the suggested cap would have been limited by the proposal and would have ended up with a smaller allocation than they did Tuesday. In the cold light of dawn I see that you are right. I was half asleep when I posted. BTW I did say "as few as". However I prefer adrians's variation of your idea. A maximum of 2% of the loan would produce a similar, but smoother, set of figures to yours.
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warn
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Post by warn on Dec 9, 2015 9:20:33 GMT
I don't think the ability to fund afterward is the real problem and i would also hate to see to go. A percentage cap could probably work. Limit the per funding amount to 10 % of you total investment plus any cash balance. This will mean people who want more than 10% will have to transfer money into their accounts but everyone else will be restricted to a fairly decent chunk. That seems eminently fair and feasible... Comments please. Treat all buys as reservations until paid for. If someone only wants £1K of a loan but prebids £50K, and is allocated £30K, then they either pay £30K or get nothing. DON'T accept sell orders for parts that haven't been paid for. DON'T pay interest on parts that haven't been paid for. End of madness.
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adrianc
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Post by adrianc on Dec 9, 2015 9:41:07 GMT
Treat all buys as reservations until paid for. Which, of course, is what happens now. If somebody doesn't pay for their "reservation", it gets released back to the SM after 48hrs. I just happened to look at the SM at a good time this morning. There was an available chunk of a loan I'm light on, so I bought it. My transfer for yesterday's purchases and sales had already gone through, so balance = £-500. Can I then not sell until I've cleared that? Because what happened was I sold a chunk of a (new terms) loan that yesterday left me overweight on, and a chunk of a short-remaining loan. Balance = £0, within two minutes of first going to the site. If I couldn't sell until I'd paid, then I'd have had to sell the parts first, then wait for a part to come available to rebalance. In practice, I wouldn't have bothered.
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gnasher
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Post by gnasher on Dec 9, 2015 10:19:35 GMT
Only been on SS for a few weeks now, but have been operating other p2p accounts for 3+ years (FS, RS, TC, AC). Some aspects of SS I like but the whole thing feels far to much like a fast fingered casino game and not enough like a serious p2p investment site. That worries me. - Any environment where you have to pre-fund humongous amounts of monopoly money in order to get a sensible initial allocation is daft
- Any environment where you have to blaze away machine-gun fashion without any DD in order to pick up anything on SM is daft
My instinct says beware of an environment like this. The whole things seems to be running on a sentiment of enthusiasm and exuberance; not a good basis for sound investment decision making and long term stability. Unless things are managed properly sentiment will change, the bubble will burst. It could all end in tears. AC is often criticised for being overly complex, but at the moment I feel that my money there is in a much better managed and more stable environment than on SS. There have been some very good suggestions in this thread to cool it down and end the madness. Unless some or most of them are followed I think I will be avoiding any further investment in SS |
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pom
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Post by pom on Dec 9, 2015 10:34:08 GMT
No one's forcing anyone to buy on the SM without reading the docs first. OK you may not want to read them for EVERY loan in the hope they may come up, but it's a lot more likely that the larger loans will be traded so you can always prioritise that way and then keep an eye out for the ones you want. And once you have a little bit in a loan you want, then if you use the list version of the available loans you'll be able to see it and realise instantly that that is definitely a loan you want to build up (assuming you have a standard target size across all your loans anyway - gets a bit more complicated if you want to have different targets for different loans).
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SteveT
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Post by SteveT on Dec 9, 2015 10:38:30 GMT
I've no need of lending more currently but I've been watching the Available Loans page this morning and I could have invested many thousands if I'd wanted. Some big chunks have been offered that took 30+ seconds to fill. I don't accept the "have to blaze away machine-gun fashion without any DD" comment above; all of the documentation for all of the live loans is there to read at your leisure. All you have to do is identify which loans you want to buy into, make a shopping list on a Post-It note and wait for parts to appear.
It's hardly SS's fault if there are 10 people on-line all trying to buy the same loan-part and only 1 gets it. Either take the patient approach and use the pre-funding system to buy into new loans or accept that the SM currently has a huge imbalance of demand over supply (which will change instantly as soon as the next BIG loan is launched).
[crossed with pom!]
ps. Here's a hint for free: use PageMonitor (or similar) to scan every few seconds for change in the Available Loans page and "cuckoo" loudly when it does.
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