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Post by dualinvestor on May 13, 2016 15:06:08 GMT
I am generally against more restrictions. I think the OP is trying to create a hierarchy of P2P risk levels. But what is so esoteric about aircraft finance as compared with other finance? And how many aircraft finance companies do you know that have got into financial difficulties in the last 15 years?
I think it would be good if platforms had to ensure full details of loan were available for at least 24 hours before going live to ensure sufficient time for due diligence. But what about platforms where there is nothing to DD because hardly any information is provided or it is unsecured? If there are to be restrictions surely it is unsecured lending that should be resticted to HNWI because of the extra risk involved? At the very least you could argue that there should be more prominent warnings that you are totally relying on the platform's black box credit processes.
Aircraft finance, as offerred by Ablrate is escoteric because in no case do they offer a first charge, enforcement is subject to The Geneva Convention of recognition of rights in Aircraft, which has variable interpretation depending on the jurisdiction, and no mention of said convention anywhere on the platform, as far as I can see.
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Post by propman on May 13, 2016 15:32:22 GMT
I am generally against more restrictions. I think the OP is trying to create a hierarchy of P2P risk levels. But what is so esoteric about aircraft finance as compared with other finance? And how many aircraft finance companies do you know that have got into financial difficulties in the last 15 years?
I think it would be good if platforms had to ensure full details of loan were available for at least 24 hours before going live to ensure sufficient time for due diligence. But what about platforms where there is nothing to DD because hardly any information is provided or it is unsecured? If there are to be restrictions surely it is unsecured lending that should be resticted to HNWI because of the extra risk involved? At the very least you could argue that there should be more prominent warnings that you are totally relying on the platform's black box credit processes.
I think it is appropriate for different models to be allowed. The level of disclosure by some hedge funds before the fact is very low and certainly insufficient to allow retail investors to determine the true level of risk as they have significant discretion of investing in products with widely varying risk. They rely on reputation, investors need to trust the provider. Clearly this is also the case in many P2Ps. Arguably the compensation cases have indicated that what matters is not so much the level of disclosure (retail investors are seemingly not required to try and read the details of the products they invest in), but the overall marketing impression given. As such, additional due diligence material may not be what they are looking for. Maybe there would be more sympathy for TC (significant minimum investment per loan perhaps making due diligence a reasonable assumption), than products with low investments per loan.
Sorry to make my usual point yet again, but I don't think secured loans are generally lower risk. The risk is mitigated by the security, but in many cases from wholly unacceptable to significant. There is a reason why property development loans pay high returns! The share price of both Land Sec & British Land (the 2 largest listed UK property companies) dropped about 30% in the last 12 months and that is without a property recession.
- PM
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Post by meledor on May 13, 2016 15:46:25 GMT
I am generally against more restrictions. I think the OP is trying to create a hierarchy of P2P risk levels. But what is so esoteric about aircraft finance as compared with other finance? And how many aircraft finance companies do you know that have got into financial difficulties in the last 15 years?
I think it would be good if platforms had to ensure full details of loan were available for at least 24 hours before going live to ensure sufficient time for due diligence. But what about platforms where there is nothing to DD because hardly any information is provided or it is unsecured? If there are to be restrictions surely it is unsecured lending that should be resticted to HNWI because of the extra risk involved? At the very least you could argue that there should be more prominent warnings that you are totally relying on the platform's black box credit processes.
Aircraft finance, as offerred by Ablrate is escoteric because in no case do they offer a first charge, enforcement is subject to The Geneva Convention of recognition of rights in Aircraft, which has variable interpretation depending on the jurisdiction, and no mention of said convention anywhere on the platform, as far as I can see.
I think it might be worth you reading the FAQ pages at Ablrate as there are some factually incorrect statements in your post. It is the Cape Town Treaty (rather than Geneva) that you presumably mean and the whole point is that it creates standard protocols regardless of jurisdiction.
en.wikipedia.org/wiki/Cape_Town_Treaty
As regards security the planes typically are placed in SPVs and at the very least there is a charge over the share ownership of the SPV.
Both the Cape Town Treaty and the SPV structure are explained in the FAQ pages.
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Post by dualinvestor on May 13, 2016 15:58:20 GMT
Aircraft finance, as offerred by Ablrate is escoteric because in no case do they offer a first charge, enforcement is subject to The Geneva Convention of recognition of rights in Aircraft, which has variable interpretation depending on the jurisdiction, and no mention of said convention anywhere on the platform, as far as I can see.
I think it might be worth you reading the FAQ pages at Ablrate as there are some factually incorrect statements in your post. It is the Cape Town Treaty (rather than Geneva) that you presumably mean and the whole point is that it creates standard protocols regardless of jurisdiction.
en.wikipedia.org/wiki/Cape_Town_Treaty
As regards security the planes typically are placed in SPVs and at the very least there is a charge over the share ownership of the SPV.
Both the Cape Town Treaty and the SPV structure are explained in the FAQ pages.
Your original query was why was it esoteric, I answered that, I may have gotten the treaty wriong. Your answer raises its own question, if you have a charge over the underlying asset of the SPV what use is an additional charge over the SPV itself? The old adage is, "How do you make a small fortune out of aviation? You start with a large one" Edit If you find the return of with the12% attendent risks in secondary aircraft leasing that is up to you and I have no wish to stop you investing in such loans/leases.
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Post by meledor on May 13, 2016 16:29:24 GMT
I think it might be worth you reading the FAQ pages at Ablrate as there are some factually incorrect statements in your post. It is the Cape Town Treaty (rather than Geneva) that you presumably mean and the whole point is that it creates standard protocols regardless of jurisdiction.
en.wikipedia.org/wiki/Cape_Town_Treaty
As regards security the planes typically are placed in SPVs and at the very least there is a charge over the share ownership of the SPV.
Both the Cape Town Treaty and the SPV structure are explained in the FAQ pages.
Your original query was why was it esoteric, I answered that, I may have gotten the treaty wriong. Your answer raises its own question, if you have a charge over the underlying asset of the SPV what use is an additional charge over the SPV itself? The old adage is, "How do you make a small fortune out of aviation? You start with a large one" Edit If you find the return of with the12% attendent risks in secondary aircraft leasing that is up to you and I have no wish to stop you investing in such loans/leases. I think the airline industry has changed a lot since that adage was coined. However I don't think it ever really applied to the aircraft finance industry.
The main point of my comment was that aircraft finance is not as esoteric as you think. If you stick with mainstream planes with good demand profiles (such as the ATR 42/72 for the Ablrate loans) that I can think of far riskier asset based lending.
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Post by tybalt on May 13, 2016 17:45:25 GMT
In a world in which I can open an online gambling account, have contracts for difference and spread betting pimped to me over the phone I do not think controls are appropriate.
Do we have training sessions in the Heathrow departure lounges in which people are held until they have mastered the differences between European, American and Mexican roulette wheels ?
Do we insist that people read and are tested on Scarne on Cards before they are admitted to a blackjack table ?
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Post by GSV3MIaC on May 13, 2016 20:26:54 GMT
Nope, but there should be an obvious and enforceable difference between gambling, investing, and saving, IMO.
'Caveat Emptor' is all very well, unless/until 'the state' (meaning you, and me, via our taxes) are supposed to pick up the pieces if they didn't caveat enough.
(but the PPI ambulance chasing is silly in the other direction, I dunno anyone who was put in the poorhouse by buying PPI .. taking too much credit .. yes, for sure).
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jonah
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Post by jonah on May 13, 2016 20:55:09 GMT
I wouldn't be classed as sophisticated in investment terms I suspect. I don't have the experience of say mrclondon in terms of p2p, or of samford71 in terms of investment/ risk analysis or several people in terms of company balance sheet unpicking or valuation interpretation. I look to protect myself by putting an amount into p2p which even if I lost every penny on every platform wouldn't be the end of the world. Yes I would be gutted, but I would survive. Losing any single platform would hurt, but less than the lot. Losing any combination of 4-5 loans, even at 100%... Well you get the point. I've got more cash in cash than p2p. More in shares/share funds/bond funds etc. I don't intend to ever go 'all in' with p2p and will be investing net around twice the amount in funds than in p2p this month. That said, I would say I'm reasonably good at arithmetic. I like reading on a subject and trying to learn from people who know more than I do. I like the depth of information given on AC, but I know I'm not good, don't know enough and frankly might be too lazy to spot all the issues, which is why I like reading here and why I have more than twice the money in my GBBA than MLIA, something which probably won't change. P2p offers, if you time it well, apparently fantastic returns with minimal risks. I know that the minimal part is an illusion. I do expect there will be some sizeable issues in the coming weeks or months or years and people will get burnt. Personally, for accounts like W or GBBA etc, I would suggest that with additional warnings they can become mainstream products. Accounts such as Rebs or FC or MLIA I would not be surprised to see needing additional steps 'protecting' people like me after the next big scandal or the one after. |
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james
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Post by james on May 13, 2016 22:46:22 GMT
Rather than the FCA solely judging whether the company has the proper procedures in place should it also make sure that the people who do invest, especially in the high return platforms, are capable of understanding risks and can afford to lose their capital invested? No, it shouldn't, because "can afford to lose their capital invested" is an inappropriate standard. Few of us could afford to lose most of our pension pots and non-pension savings but we routinely invest those things in risk assets. I'm heading in the direction of more than 75% of my total investments being in P2P, with most of the rest in other risk assets, and could not afford to lose all of that, but there is also a lack of a reasonable scenario which would have that outcome. Instead I keep individual investment exposures to a level I could afford to lose and also manage per-platform risk similarly. For my largest P2P investment I was explicit in telling an employee of the platform concerned that the cap on my investment was for risk management and how that level was set in relation to my total investable assets. As most people on here already know some investment opportunties are only available to people who can demonstrate that they know the risks of the transactions they are entering into and/or are HNWI (High Net Worth Individuals), particularly options trading, CFDs etc. ... there does appear to be a marked optimism amongst some on this board, who can be presumed to be the more experienced P2P investors, that there is little risk in P2P Note sure I'd agree with that, for example my own perception its that in current circumstances the risk is lower than some other alternatives, as well as potential returns being higher. Based in part on things like cyclically adjusted P/E ratios, toppy activity and near to longest bull market duration in some major equity markets and the state of bond markets. I'm increasing my P2P exposure to reduce my overall risk exposure. Are there any UK platforms left that do only unsecured retail lending? The two biggest in the area abandoned it and now do a mixture of retail and small business lending instead, with at least one of them I think not even offering any way to lend just to consumers for non-business purposes. What risk rating would you give to platforms that use mainly online risk assessments of their loans for small business purposes, with remote human examination also, like say RateSetter? That appears to be Lord Turner territory but I'm sure that the platform concerned would not agree with Lord Turner's apparent view that the lack of a visit to the firm inherently makes the loans high risk and a recipe for major losses on those loans. Everyone should have sufficient capital in safer investments to cover P2P disasters, Why? What is your proposed scenario that would cause me to have disastrous losses in P2P over say four different platforms and normal funds such that I overall suffer a disastrous loss in net worth? I would like to see regulator action to force platforms to ...
b) provide full disclosure of borrower's financial affairs ... Without that, restricting p2p to sophisticated investors is a necessity IMO to protect the platforms (and hence indirectly us) from the huge risk to the sector of mis-selling action due to the misrepresentation of the underlying assets by the platform.
So, I borrowed money from Zopa some years back. What would you want to see from me and other borrowers at Zopa in the way of full disclosure to lenders of their financial affairs? Recent bank statements from all of their current, savings, fund, pension and other accounts perhaps, as well as current loan and credit card statements? Which individuals at a business would you have required to also provide that information so we can check whether they might be inclined to stake the money for an undeclared purpose? Should the disclosure include identity of properties owned with links to street views and professional valuations of the properties so their value can be assessed? I do not agree that P2P should be restricted to only sophisticated investors, nor to both sophisticated and high net worth investors. The heart of P2P is the non-sophisticated investors who are not high net worth individuals. I do now meet the requirement to self-certify as a sophisticated investor because I've used P2P to invest via lending in many unlisted businesses. I suspect that most reading this discussion now also qualify courtesy of their own P2P investments. But perhaps you didn't mean the regulatory definition of sophisticated investors? I wouldn't be classed as sophisticated in investment terms I suspect. I don't have the experience of say mrclondon in terms of p2p, or of samford71 in terms of investment/ risk analysis or several people in terms of company balance sheet unpicking or valuation interpretation. Can you honestly write "I am a self-certified sophisticated investor because at least one of the following applies: ... I have made more than one investment in an unlisted company in the two years prior to the date below;". If you can, welcome to the ranks of sophisticated investors. Most loans offered via business lending platforms will count towards that requirement. These days so may a lot of lending at formerly consumer lenders Zopa and RateSetter now they are doing small business loans. Aircraft finance, as offerred by Ablrate is escoteric because in no case do they offer a first charge, enforcement is subject to The Geneva Convention of recognition of rights in Aircraft, which has variable interpretation depending on the jurisdiction, and no mention of said convention anywhere on the platform, as far as I can see. One of the problems of P2P is people who don't know enough about it having negative views. You've just demonstrated that this also applies to some who do use P2P, since there is usually going to be a charge held by the SPV that is for the benefit of the lenders and the SPV may also have money initially and regularly paid into it for purposes like maintenance and insurance to protect the value of the asset. Similar would broadly apply to the aircraft loans offered by MoneyThing. Aircraft leasing has different economic properties from running commercial passenger airlines but you appear to be mixing the two and assuming wrongly that they have the same properties. Nope, but there should be an obvious and enforceable difference between gambling, investing, and saving, IMO. 'Caveat Emptor' is all very well, unless/until 'the state' (meaning you, and me, via our taxes) are supposed to pick up the pieces if they didn't caveat enough. (but the PPI ambulance chasing is silly in the other direction, I dunno anyone who was put in the poorhouse by buying PPI .. taking too much credit .. yes, for sure). So is investing in stock markets gambling, as many would describe it? Is investing in a tracker-like bet with no leverage at a spread betting firm gambling, investing, both or neither? What about a contract for difference or doubly or triply leveraged tracker ETFs, which can be a handy tool for risk reduction when used to reduce net exposure to a market without selling the underlying assets?
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Post by ablrateandy on May 13, 2016 23:10:19 GMT
"The old adage is, "How do you make a small fortune out of aviation? You start with a large one""
Sorry but as observed above, that quote is about owning an airline, not providing debt to one. Have a trawl online and you'll find plenty of professional opinions stating that leasing is better than running an airline. None of our aircraft get close to 100pc LTV, we have a 100pc record on repayments and we operate in a space that we are comfortable with.
The Cape Town Convention is widely enough implemented that we are pretty comfortable with it. We are also happy with the security that we have - primarily that we could ground any aircraft that Phoenix owns if a payment is missed. I'd be willing to bet that if Mrs Miggins defaulted on her bridging loan on the same day that one of our lessees missed a lease payment, we would get the asset back quicker (Phoenix's historic average is three months to recover and re-lease the asset on the 3 occasions where it has repossessed an aircraft out of >400 leases)
Just because a loan is "esoteric" does not make it something that should be ignored or that is more complex.
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registerme
Member of DD Central
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Post by registerme on May 13, 2016 23:35:06 GMT
"The old adage is, "How do you make a small fortune out of aviation? You start with a large one"" Sorry but as observed above, that quote is about owning an airline, not providing debt to one. Have a trawl online and you'll find plenty of professional opinions stating that leasing is better than running an airline. None of our aircraft get close to 100pc LTV, we have a 100pc record on repayments and we operate in a space that we are comfortable with. The Cape Town Convention is widely enough implemented that we are pretty comfortable with it. We are also happy with the security that we have - primarily that we could ground any aircraft that Phoenix owns if a payment is missed. I'd be willing to bet that if Mrs Miggins defaulted on her bridging loan on the same day that one of our lessees missed a lease payment, we would get the asset back quicker (Phoenix's historic average is three months to recover and re-lease the asset on the 3 occasions where it has repossessed an aircraft out of >400 leases) Just because a loan is "esoteric" does not make it something that should be ignored or that is more complex. If Mrs Miggins is that bad at bridge, how much will she pay for a rubber?
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Post by ablrateandy on May 13, 2016 23:36:30 GMT
Is this a moderator trying to lure me into making a rude joke before banning me  |
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registerme
Member of DD Central
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Post by registerme on May 13, 2016 23:38:02 GMT
Not at all sir, just look at the term sheet.
(aka rules)
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Post by dualinvestor on May 14, 2016 7:55:35 GMT
"The old adage is, "How do you make a small fortune out of aviation? You start with a large one"" Sorry but as observed above, that quote is about owning an airline, not providing debt to one. Have a trawl online and you'll find plenty of professional opinions stating that leasing is better than running an airline. None of our aircraft get close to 100pc LTV, we have a 100pc record on repayments and we operate in a space that we are comfortable with. The Cape Town Convention is widely enough implemented that we are pretty comfortable with it. We are also happy with the security that we have - primarily that we could ground any aircraft that Phoenix owns if a payment is missed. I'd be willing to bet that if Mrs Miggins defaulted on her bridging loan on the same day that one of our lessees missed a lease payment, we would get the asset back quicker (Phoenix's historic average is three months to recover and re-lease the asset on the 3 occasions where it has repossessed an aircraft out of >400 leases) Just because a loan is "esoteric" does not make it something that should be ignored or that is more complex. The point raised in the OP was that it was esoteric (i.e. unusual, out of the ordinary) it has raised a bit of dixcussion. My personal views on the value and enforcability of the security is somewhat less sanguine. Given the vast swathes of the Arizona dessert covered at various times by redundant, formerely leased aircraft and the well publiscised problems of primarary aircraft leasing companies in more difficult economic times that does not auger well for secondary companies if and when those circumstances re-occur. To me it is interesting that a throwaway line not meant to infer that it was less safe has attracted such righteous indignation. A few other points Comparison of P2P to Gambling
Someone entering a casino knows that in the time it takes to spin the wheel, deal the cards throw the die they will win or lose. Despite the fact that they are usually in plush premises filled with paid staff a deluded few believe they can beat the house but are soon disabused of that notion. If people believe that investing in P2P is a similie to that then perhaps they already understand that they are taking a gamble. Experienced Investor Status
In every case where I have been obliged to establish this it has been by self certification. HNWI
Again by self certification, I have never had to provide evidence. Additionally being a HNWI does not make a person a more astute investor it is an indication that they are in a position to suffer losses better. As I said in the Opening Post I am not in favour of restrictions if anyone wants to invest anywhere that is up to them, however the Financial Services Act 1986 was introduced because a company was offerring a return investing exclusively in gilts higher than the then yield and eventually fell over (loss to the public c.£30 million, annual cost of compliance upwards of £3billion), Icelandic banks were offerring unguaranteed returns higher than other banks, both cases of "if something apppears to be too good to be true, it usually is." So I do not believe the authorities' duty is to protect people from their own folly.
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am
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Post by am on May 14, 2016 11:12:23 GMT
Nope, but there should be an obvious and enforceable difference between gambling, investing, and saving, IMO. 'Caveat Emptor' is all very well, unless/until 'the state' (meaning you, and me, via our taxes) are supposed to pick up the pieces if they didn't caveat enough. (but the PPI ambulance chasing is silly in the other direction, I dunno anyone who was put in the poorhouse by buying PPI .. taking too much credit .. yes, for sure). On the other hand, I have the impression that a significant number of businesses came a cropper on interest-rate swaps.
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