dorset
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Post by dorset on Apr 6, 2014 17:21:49 GMT
As background I have been with FC for about two years and have about 800 loans and 1400 loan parts. I spend a lot of time filtering and typically invest in about 20% of the loan offers that come up. To date I have had four loan defaults. The collapse of the secondary market will increase my default rate as I used to periodically sell (never flip) loans that were looking suspect. Since January I have ceased to add to my FC account (was up to £2k per month) until I assess the change in platform risk. In other words the risk to an individual loan is unchanged but the investor’s portfolio risk has risen. My view is that FC will need at least £10 million of new money each month to properly fill the loans coming up and to provide liquidity to the SM.
I don’t have an answer to the funding problem facing FC but until such time as it resolves itself any new money from me is going into Assetz where I am currently testing the waters. I appreciate that FC is not a market maker and simply provides the platform but this does not deal with the liquidity risk. As an aside I invest in FC as an interest as well as to help business and screw the banks (hopefully). In some ways FC is a hobby activity. If I were to cost out my time in building up my portfolio then I would be working for less than the minimum wage.
In other areas I have substantial sums in RateSetter (my favourite, simple yet elegant) but only about £10k or so in Zopa. I have given up on Zopa and am simply rolling over the investment. Shame about Zopa, completely lost its way from being the first in the market to being out innovated by everyone else. The Zopa business model is IMHO defunct and has become a simple savings vehicle. Once three year fixed term cash ISA rates get above 4% (by mid 2017?) then it will struggle to grow. How much Zopa money is driven to the site simply through the financial repression created by QE?
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Post by davee39 on Apr 6, 2014 19:15:54 GMT
Wholly agree re Zopa - Lack of innovation and development leaves RS poised to overtake in the P2P market over the next few years. Regarding FC I have been shifting £20 loan parts very slowly, the ramping up of rates recently makes older loans less attractive to me and potential buyers so progress selling is slow, however the cashback qualifying loans are already slipping back towards the rates of a few weeks ago, while flippers are clearing a small margin by selling at a discount. I have seen £40 loan parts at -.2%. I expect normality to be restored as new loans reduce ahead of the Easter break. The move into property might siphon cash from business lending, but FC are pursuing commercial lenders to help plug the gap.
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Post by GSV3MIaC on Apr 6, 2014 22:22:03 GMT
IMO ZOPA innovated in quite the wrong direction, turning themselves into Santander lite (and without the deposit guarantee). First I lost control over who to lend to, then over risk bands, and then over the rates. Even their name no longer matches what they do. Rs are about 1% Ahead, unless you want to cash in early.
FC still have a sensible model, as copied by others, but their systems, marketing, and treatment of customers (at least the lenders, who are in the majority I assume) are all pretty sucky. Will have to see where next, but these 'property loans' and the API release, more commercial money, etc etc all get much talked about and not yet delivered.
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merlin
Minor shareholder in Assetz and many other companies.
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Post by merlin on Apr 7, 2014 6:19:39 GMT
FC still have a sensible model, as copied by others, but their systems, marketing, and treatment of customers (at least the lenders, who are in the majority I assume) are all pretty sucky. Will have to see where next, but these 'property loans' and the API release, more commercial money, etc etc all get much talked about and not yet delivered. I agree with you on all aspects. The FC model is quite elegant and is easy to understand at the user interface but just about everything else is below third rate. My guess is that all the P2P platforms have been spending a lot of time and effort in getting into line following "regulation". In the case of FC some of these changes are already apparent in the default recovery area for instance, but just about everything else seems to have gone on the back burner. My guess is that the next few months will be critical for FC in sorting out their front and back office operations as well as the overarching liquidity problems. Interesting times I think but best watched from the side lines.
10pm Update. Looking at how the auctions finished on Friday and have continued this morning, the primary market appears to be tightening further. If this trend continues we could soon move back to the position where the SM starts to look attractive again but only of course if there is enough cash in the pot to push it on.
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oldgrumpy
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Post by oldgrumpy on Apr 7, 2014 9:54:10 GMT
My well below MBR loan parts on the secondary market have started to sell again - albeit slowly. Never mind. Every A sold at 7.5% is being replaced by one at 10+%.
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Post by GSV3MIaC on Apr 7, 2014 11:20:14 GMT
The liquidity see-saw has flpped back the other way now, with only about 60 loans on the primary market and only half of those at interesting rates (i.e. higher than secondary market), so I guess the next problem will be finding As at 10% you can actually buy!! Everything except today's (two!) are fully funded already IIRC.
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jimbo
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Post by jimbo on Apr 7, 2014 13:38:06 GMT
Been buying on the SM at 0% markup since last Thursday. Still gradually selling lower yielding parts to autobidders on the SM, and manually recycling into higher yielding parts. Saw this coming on day 2 after the cashback offer was announced. Fresh money came into the platform (a tiny amount of which was mine) and the primary market rates started dropping. A couple more weeks of the 1% cashback, and I reckon the days of being able to score Band As at 12%+ will end up becoming a distant memory once again...
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blender
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Post by blender on Apr 7, 2014 14:18:36 GMT
I agree very much with Dorset's analysis in the OP. The liquidity in an FC portfolio, carefully constructed and managed, was one of the factors which encouraged me to lend a sum of six figures. Risk is reduced by choosing, by selling those which go late and by deciding how long to hold a loan - for example C- looked good if they could be held for three months and then sold without a loss. That requires liquidity and the liquidity crisis has increased risk and/or cost. But I have sold what I needed to now for tax reasons, at a cost rather than a profit, and my avatar has been uncaged.
FC do not seem good at managing growth without these wild imbalances between borrowers and lenders, and they seem only to be getting out of this latest one by reducing loans. If we go back to the mid 2013 MBR crisis, the problem there was that FC had attracted much more lender cash from the consumer end but could not find the borrowers to balance it. Now they have had a step increase in borrowers through the borrower and agent promotions but without the lender cash to fund it. I imagine that the acceptance rates are falling, which means that FC is doing a lot of work for no fee, and they are having to sacrifice some of the growth they have recently acheived. There is not any market external to FC which will correct these wild swings - they are solely responsible for acheiving balanced growth. The product is great but the management ability seems to be lacking, and that is damaging confidence.
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merlin
Minor shareholder in Assetz and many other companies.
Posts: 902
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Post by merlin on Apr 7, 2014 14:44:18 GMT
I must admit the last two months have revived my interest in FC. During late Jan though early February I had a great cleanout of poor and low value loans and mostly got a reasonable premium on them. This left me holding a mid four figure investment with good returns (by todays standards) after tax and defaults. Then came the turnaround with rates going to levels I had not seen for well over a year so it was back to fill your boots time. Must admit have been a lot more cautious than when I was first building my holding and with no A+ or C- this time round. Now I have rebuilt my holding to a comfortable sized investment which is paying just over 12% gross and 9% net, figures incidentally that I had not achieved previously. Still got bids running on 21 auctions but don't expect to make any of these at prices I want. So now it is back to watch and wait time again. Roll on the good times again.
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dorset
Member of DD Central
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Post by dorset on Apr 7, 2014 18:37:25 GMT
IMO ZOPA innovated in quite the wrong direction, turning themselves into Santander lite (and without the deposit guarantee). First I lost control over who to lend to, then over risk bands, and then over the rates. Even their name no longer matches what they do. Rs are about 1% Ahead, unless you want to cash in early. FC still have a sensible model, as copied by others, but their systems, marketing, and treatment of customers (at least the lenders, who are in the majority I assume) are all pretty sucky. Will have to see where next, but these 'property loans' and the API release, more commercial money, etc etc all get much talked about and not yet delivered. But this was not innovation in the accepted sense. Zopa panicked at the success of RateSetter's Provision Fund and simply copied it with Safeguard. They then completely screwed up by removing all investor choice on rates. For the last seven days I have had several hundred pounds sitting on offer with Zopa (rollover money) and am powerless to shift it other than out of Zopa. Whereas I have been investing all of my RS cash at rates of 4.5% or so for 3 years in a matter of hours (Zopa are quoting 4.0% for 3 year money!).
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Post by GSV3MIaC on Apr 7, 2014 19:26:01 GMT
I shifted it out, and into RS and FC, where I have some control over it. Despite safeguard, ZOPA won't actually let me sell some SG loans which had first payment a day late .. How safeguarded is that!
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blender
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Post by blender on Apr 7, 2014 22:06:10 GMT
I must admit the last two months have revived my interest in FC. During late Jan though early February I had a great cleanout of poor and low value loans and mostly got a reasonable premium on them. This left me holding a mid four figure investment with good returns (by todays standards) after tax and defaults. Then came the turnaround with rates going to levels I had not seen for well over a year so it was back to fill your boots time. ... So now it is back to watch and wait time again. Roll on the good times again. I agree with your implication, Merlin, that the optimum way to use FC would be to take money in and out according to the conditions on the FC platform, according to whether they support buying or selling. But some of us do not wish to work that hard and we spend enough time on managing an FC portfolio without wishing to get involved with other platforms, just to be able to ride the FC waves when the tide is right. We must respond to economic cycles, but do not need FC cycles superimposed. Some consistency and predictability should be provided by FC if it is to inspire confidence in its general investors (and its venture capital backers). 'No surprises' is a good maxim.
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fasty
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Post by fasty on Apr 7, 2014 22:39:11 GMT
I'm really surprised at just how fast rates have plummeted. Is it direct a influence of cashback luring in more lenders, or have a whole bunch of people finally stopped last-minute ISA plumping and now looking for another outlet for their savings? The secondary market does seem to awoken somewhat, although there seems a lot more interest in my A's and B's, whereas C's, and especially C-'s definitely seem to have lost their charm recently. Anyone else notice that?
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jimbo
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Post by jimbo on Apr 8, 2014 2:51:56 GMT
I'd put the drop in rates down to a combination of the cashback incentive and less loans listed last week.
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Post by valerieb on Apr 8, 2014 8:27:04 GMT
Presumably the cash back offer will close soon and the number of loans on offer will continue to reduce until after Easter. I've been lowering my risk level (hopefully)by concentrating on large A and B loans recently but will have to return to the C's now rates are falling - perhaps that's what will happen on the secondary market too.
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