Investment Performance - targeting 7.0%+ p.a.

Greenwood2

I've started with some screenshots and descriptions first, to hopefully make things clearer:

Rate on Detailed Loan Tables


This is the Gross interest rate paid by the Borrower. This is displayed to give an indication of the underlying credit risk. As the note says, it is before any Third Party Platform fees.

We have received a separate request from another to add a column with the rate net of Third Party Platform fees - and we will do this.

Rate on Summary Dashboard

In the centre of your summary dashboard there is a "currently earning" rate:



This is an estimation of the current net return you are earning across your investments (before accounting for our 1.0% fee and your tax), based on the weighted average of the interest rates net of any Third Party Platform fees.

Accrued interest in your Returns statement



This is the interest that is due to you, net of third party platform fees, across all of your investments, since the last loan repayment date for each loan - each loan will repay on different days in the month, but most will repay something in the month (only a very few have interest rolled-up).  This is an estimate, but is a good proxy for amounts that should convert into "Paid interest" for the period you have held each investment to date.

Your questions

Hopefully (1) and (2) are covered by the above.  Please let me know if not.

Re (3) - for losses, from the outset, we modelled 0.5% to 2.0% (based on the type of loan); but we have seen less than 0.03% losses to date (and even this small amount is still in recovery). 

Third Party fees:  these are accounted for in the headline figure.  Four platforms out of 20 that we currently use charge investor-sided fees. In most cases these are 0.5-2.0%; but the largest fees are with MarketInvoice (see page 12 of their Investor FAQs pdf).  We consider Third Party Fees a zero-sum-game though, as those with higher fees for the investors are generally delivering higher interest rates (for comparable credit) to the investors.

Re:  "How is this net?" - it is net of all Third Party Platform fees.  

Granted it is not net-net - i.e net of our 1.0% fee as well. But our 1.0% fee is stated expressly in the Returns summary on everyone's dashboard and updated daily.

I take your comment on board, and we will discuss it here.

Re: "show all your figures in a consistent manner":  They are consistent with each other.  It's just that we are showing different things.  For example, the Gross borrower rate is very helpful in demonstrating credit risk - and we've received positive feedback for sharing this, so I think there is merit for showing additional detail, rather than a single underlying figure, or one-size-fits-all-approach.

Re: "that is the rate you are paying your lenders": different lenders have different tax positions, and because our fee is treated differently for tax purposes by different clients based on their own tax position, their net-net-net (including tax) position can vary.  So I think it is misleading to not show the underlying detail.  Without this, they may be unable to work out what it means for them.

I agree.

I have just dipped two hirsute toes into this, platform supposedly for a "safer" P2P investment.
I agree, that the "your current rate" figure, emblazoned so prominently and centrally on the summary page, should be what it says after deduction of the 1% BondMason fee (or made clear in that box that the fee needs to be deducted).

I have three loans already £60!! Wow! Current return 6.66% but if it really means 5.6%, there is little incentive to move anything from RS as has been suggested.

Yes, I wasn't actually mithering about the rate ... yet I'll wait until my £1000 has been dispensed before thinking about that. I just think that your 8.59% should be shown as 7.59%, if in fact that is what you are achieving after BM's fees.

Edit: if I can get 7.5% after fees with safety I will be reasonably happy...


...ish

I queried the small headroom for losses in a previous post above, Steve Findlay's reply was:

'- for losses, from the outset, we modelled 0.5% to 2.0% (based on the type of loan); but we have seen less than 0.03% losses to date (and even this small amount is still in recovery).'