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Risk
Mar 11, 2016 22:50:15 GMT
Post by valueinvestor123 on Mar 11, 2016 22:50:15 GMT
I find it strange that the OP seems to find p2p like SS a risky proposition when they appear to be fans of investing through spread betting. (as seen in other posts made on the P2P forum.) Spreadbetting can be VERY risky as is any leveraged investment. But it's like nuclear power; if used correctly it can be very useful and relatively harmless. I don't use spreadbetting for 'betting' but for a part of my investments which are all long-term; the exposures are always covered more than 100% by funds so it's not technically geared. It is more tax efficient that way plus you can access other asset classes easier and be more diversified (gold, commodities, currency hedges if needed etc). It's not a large %age of net assets though. But still, I remain uneasy about the fact that some of those funds marked as collateral for spreadbetting, are held with p2p platforms (to offset the interest charged by IG index ) so should both the stockmarket and p2p become perfectly correlated....booom.
The main thing is liquidity. For me, quick access to funds is more valuable than high % return. I guess it's impossible to speculate about a possible 'black swan' with p2p. By its very nature, it is entirely unforeseeable but it's interesting to hear different perspectives. Still, 12% implies a relatively high degree of assumed risk somewhere...which hasn't materialised itself yet. It's not negativity, just the way market forces work.
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Post by loanstar on Mar 11, 2016 22:51:34 GMT
It is also worth looking at each case in detail. Some are looking for planning gain. Another has a partner with a poor loan tracker record. Student bedsits seem to be popular but all in one city. Another is a waste to energy scheme using new technology, I could go on. Add to this what has been said above and 12% looks a fair reward for the risk.
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Risk
Mar 11, 2016 22:56:07 GMT
Post by valueinvestor123 on Mar 11, 2016 22:56:07 GMT
"Not with the new T&Cs. All the loans that come under the new T&Cs state that we (the investor) are lending to the borrower, not SS. I HIGHLY recommend you study the platform BEFORE you invest in it." That's great news - thanks for correcting me. When I started with SS, this was not the case. Unfortunately, I can't keep up with everything; money allocation is a full time job and I have 2 others.
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beechside
Member of DD Central
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Post by beechside on Mar 11, 2016 23:38:28 GMT
Let me re-phrase the question then: why do borrowers go to savingstream if they could get financing of around 3-5% from a bank? Or rather, why do banks reject these borrowers if the assets are solid? I have never worked in banking so can only tell you what I've heard. Banks prefer amortized loans. That is, they want regular repayments of interest and capital. When a project is refurb or development or similar, there is no regular income and the final repayment depends totally on the project being completed and the projected capital being achieved. My sources tell me that banks consider such projects ab initio to be too risky for their low rate loans or indeed for loans at all. That's why the bridging loan industry exists in the first place. Banks may step in once the project is well under way and that's a typical exit strategy for many P2P borrowers. Hope that helps...
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ablender
Member of DD Central
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Risk
Mar 12, 2016 8:24:32 GMT
Post by ablender on Mar 12, 2016 8:24:32 GMT
The main thing is liquidity. For me, quick access to funds is more valuable than high % return. If quick access was my highest priority I would put all my money with AC's Quick Access Account. Currently it gives 3.75% and boasts of near instant access to your money. However I find it hard to understand your position (Priority to fund access) vs the other investing products you use, which I cannot see them as particularly quick access, but rather aim at getting better returns. Correct me if I am wrong.
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Post by meledor on Mar 12, 2016 9:41:26 GMT
My question relates specifically to savingstream (and perhaps to assetzcapital and fs to some extent). I realize there are dozens of other p2p platforms. I have been investing 6-figure sums with them for just over a year but the majority of my net assets are still in more 'traditional' stocks & bonds investments. I am cautious putting more than 20% of networth in p2p. Let me re-phrase the question then: why do borrowers go to savingstream if they could get financing of around 3-5% from a bank? Or rather, why do banks reject these borrowers if the assets are solid? To me, it seems something is amiss. With places like fundingcircle, the rates do end up being somewhere in the region of 6% after bad debts which seems about right. But an asset backed platform such as Savingstream or fundingsecure offers twice as much interest AND seems more secure due to the assets behind them. Either the rates will have to go down (due to demand) or there are some unforeseen risks that haven't materialised themselves yet.
It might be worth considering the returns a bank gets from different types of lending. Take Shawbrook for example:
www.londonstockexchange.com/exchange/news/market-news/market-news-detail/SHAW/12721844.html
In 2015 Shawbrook's return (gross asset yield) from Asset Finance is 9.9%, and for Business Credit (SME lending) it is 9.4%. This isn't a million miles away from the sort of returns I would expect from Thin Cats, Ablrate and Saving Stream, bearing in mind the extra risks associated with bridging finance in the case of Saving Stream. It is true that Shawbrook's return from Commercial Mortgages is lower at 6.5% but here the emphasis is not only the asset (and I suspect the LTV is rather lower than what is usual on Saving Stream) but on the income coverage of the borrower, just as is the case in residential mortgages.
So I'd look at your question the other way round. Rather than concentrating on the risk with 12% what about the security of 6%? Why do you think "in the region of 6% after bad debts which seems about right" when a bank is getting higher returns than that? Does this 6% have the security similar to a commercial mortgage and how thorough has been the credit scoring and assessment of the borrower's income? In other words mightn't your 6% prove too low?
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Risk
Mar 12, 2016 15:01:19 GMT
Post by valueinvestor123 on Mar 12, 2016 15:01:19 GMT
The main thing is liquidity. For me, quick access to funds is more valuable than high % return. If quick access was my highest priority I would put all my money with AC's Quick Access Account. Currently it gives 3.75% and boasts of near instant access to your money. However I find it hard to understand your position (Priority to fund access) vs the other investing products you use, which I cannot see them as particularly quick access, but rather aim at getting better returns. Correct me if I am wrong. It's a balance: basically I need some p2p investments to be liquid and some can be tied up. Trouble is, the liquidity situation keeps evolving. SS seems currently fairly illiquid (by its standards). Presumably this will change and SS are wary of this and can control it to some extent (by not oversupplying the market with new loans).
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Post by GSV3MIaC on Mar 12, 2016 15:53:57 GMT
It does rather depend on which loans. Right now there are about half a dozen which are not very liquid (84 and 85 for instance), but there are still plenty (51, 52, etc) which are superfluid.
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ablender
Member of DD Central
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Post by ablender on Mar 12, 2016 16:58:36 GMT
To add to what GSV3MIaC already said, many have warned here that things can change quickly either way. Diversification is the best option I find, not only for security but also for access. If I need some cash and I cannot sell one thing, I will sell another. |
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