adrianc
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Post by adrianc on Jun 9, 2016 8:03:57 GMT
I've been investing on SS for around 9 months now. I've managed to achieve reasonable diversification with no single holding exceeding 50% of my yearly expected interest. That's an interesting way to look at diversification. I quite like that as a rule of thumb.
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Post by GSV3MIaC on Jun 9, 2016 8:14:56 GMT
That's still 6% exposure to any one loan. Many people, me included, would suggest a lower threshold.
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Post by justdabbling on Jun 9, 2016 8:50:46 GMT
True, but with only about possibly 60 truly separate live loans in total proper diversification to gain a portfolio effect would not be possible using SS alone.
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Post by gaspilot on Jun 9, 2016 9:03:01 GMT
Whilst I agree with this sentiment in general, I do believe there is a difference between loans that were generated under the old T's & C's and the newer loans. I was of the understanding that one didn't need to diversify over a range of loans under the old terms as essentially the lender was lending to Lendy Ltd, and not directly to the borrower. So, in essence it shouldn't have mattered if you had leant smaller amounts to lots of separate borrowers or a lot to one borrower. This now seems to be incorrect, or perhaps the terms have changed after the horse has bolted - so to speak. Had I known that there was a need to diversify under the old terms then I would have done. I can't be the only person reading it that way. Obviously, under the new terms I would diversify a lot more. This is why I feel perhaps the loans under the old terms should be treated differently to the newer ones. I have no quibble with the older loans being moved to the newer structure as long as it is communicated and time was given to enable those with substantial amounts in a small group of loans to diversify first. You seem to be suggesting that loans under the old terms have been changed. How then do you account for fact that the last PBL20 update only refers to the old terms?
"In the event that there is a shortfall then Lendy will pay you a proportion of the recovery proportionate to the amount invested by you in the loan (clause 5.3.1)."
Also the idea that one didn't need to diversify because one was lending to Lendy Ltd was regularly mentioned on this discussion board but such an opinion was not consistent with even a casual reading of the old T&Cs as the PBL20 update makes very clear.
savingstream Avatar Sept 2, 2015 11:15:17 GMT 1 savingstream said: Finally we are able to release the Lender T & Cs to you for your review. These have been signed off by Grant Thornton and also Clarke Willmott LLP who confirm that this new structure will stand up as a P2P platform and your security will be treated as such. We intend to go live with these T & Cs next week, you will not have to do anything. Lender T & Cs : www.savingstream.co.uk/documents/lenderterms.pdfOld You lent to Lendy Ltd who then lent to the borrower. New When you invested in a loan, we kept detailed records of this, but an administrator may consider it a pari passu risk (http://www.investopedia.com/terms/p/pari-passu.asp) in the event of Lendy Ltd’s (highly unlikely) bankruptcy. One bad loan, could in theory, undermine the rest. When we become a Pure P2P platform, you lend to the borrower via Lendy Ltd and a “nominee company” called Saving Stream Security Holding Ltd (SSSH Ltd), holds the security on your behalf. The purpose of the nominee company is to manage the investment on behalf of all the Lenders so that the borrower only has to deal with a single entity rather than 1000’s of individuals which will constantly change as the loan parts are traded. This mitigates bankruptcy risk and one bad loan will not affect the others. Saving Stream will act as the agent and will manage - the origination of the loan, underwriting decisions, raising the capital on behalf of the lenders, perfecting the security, collecting repayments, distributing repayments to Lenders, paying monthly interest, managing the Lender database and various other activities on the Lenders behalf. Old
Lendy Ltd was responsible for covering all repayments and shortfalls as it acted as both the borrower and the lender to SS lenders.
New Now you are lending to the Borrower directly (via SSSH Ltd), Lendy Ltd no longer have any legal responsibility for covering any shortfalls. Lendy Ltd will return to the Lenders whatever is returned following disposal of the asset. Any shortfall should technically be absorbed by the Lender as a normal part of business. However, Lendy Ltd has agreed to maintain the Provision Fund of no less than 2% of the outstanding loan book i.e £35m loan book/ £700k provision fund that will be used to cover these shortfalls at the discretion of Lendy Ltd’s Directors. So far to date, we have had 1 default and managed to sell the property for almost the full valuation figure. Old If a loan went into Default, Lendy Ltd continued to pay interest at the normal rate of 1% per month. New SS Lenders will continue to earn interest, but it will accrue, rather than be paid on a monthly basis out of Lendy Ltd’s working capital. Once the loan is settled, interest and capital will be paid at that point to the extent that it is fully recovered (then the Provision Fund should step in to cover shortfalls subject to our discretion). It will still be possible to sell out of a defaulting loan, however, any interest earnt after the default has been declared will remain on your accrual account for redemption on settlement. The purpose of this is to prevent a cash-flow risk to Lendy Ltd i.e paying out interest that hasn’t been collected from the borrower could create a credible risk to the platform. ---------- Sorry, I don't know how to link from one thread to another. The above was written by saving stream when the new terms were introduced. (My bold). I inferred from that that there was no need to diversify across the loans on the old T's and C's. There seems to be a confusion here.
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Post by meledor on Jun 9, 2016 9:44:59 GMT
You seem to be suggesting that loans under the old terms have been changed. How then do you account for fact that the last PBL20 update only refers to the old terms?
"In the event that there is a shortfall then Lendy will pay you a proportion of the recovery proportionate to the amount invested by you in the loan (clause 5.3.1)."
Also the idea that one didn't need to diversify because one was lending to Lendy Ltd was regularly mentioned on this discussion board but such an opinion was not consistent with even a casual reading of the old T&Cs as the PBL20 update makes very clear.
Lendy Ltd was responsible for covering all repayments and shortfalls as it acted as both the borrower and the lender to SS lenders.
New Now you are lending to the Borrower directly (via SSSH Ltd), Lendy Ltd no longer have any legal responsibility for covering any shortfalls. Lendy Ltd will return to the Lenders whatever is returned following disposal of the asset. Any shortfall should technically be absorbed by the Lender as a normal part of business. The above was written by saving stream when the new terms were introduced. (My bold). I inferred from that that there was no need to diversify across the loans on the old T's and C's. There seems to be a confusion here.
I read all that in the context of the old T&Cs and SS introducing a new structure and do not see any confusion, but it is a shame that the perception that there is a difference between the loans under the old T&Cs and Saving Stream's comments about what happened under the old structure have only come to light now that there is a default rather than before.
It has become evident to me that not many properly consider the T&Cs when they invest.
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adrianc
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Post by adrianc on Jun 9, 2016 10:14:37 GMT
That's still 6% exposure to any one loan. Many people, me included, would suggest a lower threshold. If evenly split between a number of loans, that's just under 17 loans. If you've got a 2:1 between your largest and smallest loans, then 25. There's 39 loans I'm happy to hold at the moment. I'm below-weight on 14 of them, simply because they don't come up on the SM very often at all. If you'd not managed to find any (significant) bits of those, then there's your 25. As it happens, my max exposure is about three months' interest. Which I'm comfortable with. There are certainly more than a few loans I'd be very happy to have six months' interest in, as a short-to-medium while waiting to diversify a bit further. If you add various loans up to give a borrower-exposure figure (say, the four farmland), then I've definitely sat around that figure for extended periods.
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am
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Post by am on Jun 9, 2016 10:40:32 GMT
And why have I never seen more than about£80,000 of it up for sale. Do we know how much has changed hands in the last 2 weeks? It looks like we have some very optimistic investors who are very confident about the outcome and happy to sit tight or else there are some very dormant,sleeping,lazy investors who have just tucked their money in like a bank account and don't actively manage it on a daily or weekly basis and perhaps are in blissful ignorance about it all. IIRC, SS do not pay interest on loans that are on the secondary market (at midnight?). Thus people have to make a choice between claiming a place in the SM queue and forgoing interest, or holding onto the loan and accruing nominal interest which they hope will eventually be paid in full or in part. I can imagine people thinking that if there's no chance of their holding actually selling there's no point giving up the right to the ongoing interest. That will put an effective cap on the amount on the SM.
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Post by justdabbling on Jun 9, 2016 11:02:25 GMT
Thanks guys, this discussion and tomorrow's new release prompted me to sell the loan part I bought in error - this was the only holding that breached a limit of about one third of a year's interest. My thinking was that there should be a 50% return of capital on defaulted loans given the supposed maximum of 70% LTV, so if I was caught up in 2 defaults a year then the loss would be one third of the interest so it would still be a lot better than most investments. Of course the 'excess' loan holding sold instantly!
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adrianc
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Post by adrianc on Jun 9, 2016 11:12:54 GMT
Thanks guys, this discussion and tomorrow's new release prompted me to sell the loan part I bought in error Don't get too excited about tomorrow's new release - it's a tiddler, so you'll not get more than two or three hundred quid or so.
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freddy
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Post by freddy on Jun 9, 2016 11:13:42 GMT
I've been investing on SS for around 9 months now. I've managed to achieve reasonable diversification with no single holding exceeding 50% of my yearly expected interest. That's an interesting way to look at diversification. I quite like that as a rule of thumb. Currently it works for me. In theory it allows me 2 defaults at a total loss without any actual loss of capital. In reality it is unlikely that there would be a total loss but just provides that additional peace of mind. With the majority of the loans I'm invested in I'm nowhere near that investment cap but if it's a loan I particularly like ( a couple currently) I will go to it. Moving forwards, if the volume of loans rises or there are other changes in the market I will probably aim for 33% or 25% allowing for 3 or 4 defaults.
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mikes1531
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Post by mikes1531 on Jun 9, 2016 11:33:59 GMT
IIRC, SS do not pay interest on loans that are on the secondary market (at midnight?). Anecdotal evidence suggests that still is correct despite SS announcing -- at the time the ability to withdraw parts from sale on the SM was enabled? -- that parts for sale would continue to accrue interest while waiting to be sold. Is this another case where savingstream say one thing and do another?
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Post by justdabbling on Jun 9, 2016 13:11:46 GMT
Thanks guys, this discussion and tomorrow's new release prompted me to sell the loan part I bought in error Don't get too excited about tomorrow's new release - it's a tiddler, so you'll not get more than two or three hundred quid or so. Small fry in the fisheries? It's OK I am just dabbling.
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Post by earthbound on Jun 9, 2016 15:21:55 GMT
Don't get too excited about tomorrow's new release - it's a tiddler, so you'll not get more than two or three hundred quid or so. Small fry in the fisheries? It's OK I am just dabbling. and so you should, its only a minnow , and if you don't get the required amount and find yourself floundering , don't carp on about it here, just sit back relax and mullet over. 
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Post by earthbound on Jun 10, 2016 10:14:14 GMT
And why have I never seen more than about£80,000 of it up for sale. Do we know how much has changed hands in the last 2 weeks? It looks like we have some very optimistic investors who are very confident about the outcome and happy to sit tight or else there are some very dormant,sleeping,lazy investors who have just tucked their money in like a bank account and don't actively manage it on a daily or weekly basis and perhaps are in blissful ignorance about it all. Its just gone over the £100k , maybe lenders are starting to take notice. 
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