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Post by stevefindlay on Apr 10, 2017 11:34:00 GMT
" (3) Size: larger clients tend to do better, as they typically end-up even more diversified across their portfolio than their 1% or 2% setting may suggest (see above) "
I could understand larger clients having a more stable return but not a better return as less diversified will be more volatile but not necessarily worse.
- I understand your point. What we are considering is the average return of a large client vs the average return of a smaller (less well diversified client). The outcome from diversified P2P Lending returns on BondMason can be approximated by a skewed normal distribution (the upside is capped, the downside has a tail). So if you are more diversified (larger), you are cutting out the volatile outcomes (as you note) which is the longer end of the tail - so you are cutting out the worse outcomes. If you cut out the worse outcomes, then you will have a better average return than those that don't. Which is why larger clients do better (on average) than smaller clients. However, you are correct insofar that the best performers can be small or big investors alike.
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Post by Deleted on Apr 10, 2017 16:22:46 GMT
" (3) Size: larger clients tend to do better, as they typically end-up even more diversified across their portfolio than their 1% or 2% setting may suggest (see above) "
I could understand larger clients having a more stable return but not a better return as less diversified will be more volatile but not necessarily worse.
- I understand your point. What we are considering is the average return of a large client vs the average return of a smaller (less well diversified client). The outcome from diversified P2P Lending returns on BondMason can be approximated by a skewed normal distribution (the upside is capped, the downside has a tail). So if you are more diversified (larger), you are cutting out the volatile outcomes (as you note) which is the longer end of the tail - so you are cutting out the worse outcomes. If you cut out the worse outcomes, then you will have a better average return than those that don't. Which is why larger clients do better (on average) than smaller clients. However, you are correct insofar that the best performers can be small or big investors alike. I'm not sure I understand this. Perhaps I'm missing something but if we take the example: One client with £1000 at 1% diversity setting One client with £100,000 at 1% diversity setting Why is the average % return of the large client better?
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Post by stevefindlay on Apr 10, 2017 16:44:32 GMT
tybalt - I understand your point. What we are considering is the average return of a large client vs the average return of a smaller (less well diversified client). The outcome from diversified P2P Lending returns on BondMason can be approximated by a skewed normal distribution (the upside is capped, the downside has a tail). So if you are more diversified (larger), you are cutting out the volatile outcomes (as you note) which is the longer end of the tail - so you are cutting out the worse outcomes. If you cut out the worse outcomes, then you will have a better average return than those that don't. Which is why larger clients do better (on average) than smaller clients. However, you are correct insofar that the best performers can be small or big investors alike. I'm not sure I understand this. Perhaps I'm missing something but if we take the example: One client with £1000 at 1% diversity setting One client with £100,000 at 1% diversity setting Why is the average % return of the large client better? The £100,000 client will end up with more loans, as (practically) they won't be able to get £1,000 (1%) in every loan. Whereas, the £1,000 client will end up with exactly 100 loans (as they will be able to get £10 in each loan). The same applies for 2% settings compared across £1,000 and £100,000 clients. So the larger client has more loans, and a less volatile outcome, and so the larger client is less likely to end up with a higher return. Put another way, if the larger client has more loans out of all available loans on BondMason, their performance will be closer to the average performance across BondMason, which is (by definition) higher than the bottom quartile of returns.
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edward
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Post by edward on Apr 10, 2017 16:46:00 GMT
Well there is a valid answer to that question now. I wonder how many pots over £5k will also be liquidating?
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Post by Deleted on Apr 10, 2017 16:53:45 GMT
Well there is a valid answer to that question now. I wonder how many pots over £5k will also be liquidating? Not sure I follow - why would they be liquidating? And also in addition to who else?
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Post by Deleted on Apr 10, 2017 16:54:45 GMT
I'm not sure I understand this. Perhaps I'm missing something but if we take the example: One client with £1000 at 1% diversity setting One client with £100,000 at 1% diversity setting Why is the average % return of the large client better? The £100,000 client will end up with more loans, as (practically) they won't be able to get £1,000 (1%) in every loan. Whereas, the £1,000 client will end up with exactly 100 loans (as they will be able to get £10 in each loan). The same applies for 2% settings compared across £1,000 and £100,000 clients. So the larger client has more loans, and a less volatile outcome, and so the larger client is less likely to end up with a higher return. Put another way, if the larger client has more loans out of all available loans on BondMason, their performance will be closer to the average performance across BondMason, which is (by definition) higher than the bottom quartile of returns. Thanks, that makes sense. Most likely a typo but I think when you wrote "so the larger client is less likely to end up with a higher return" you meant more likely.
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oldgrumpy
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Post by oldgrumpy on Apr 10, 2017 16:57:16 GMT
@yescautious "Not sure I follow - why would they be liquidating? And also in addition to who else?"
You'll see the increase in BM fees for everybody pretty soon, as well as Bondmason stating they don't want any accounts <£5k.  No-one will maintain the 7% net target before defaults. |
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Post by dan1 on Apr 10, 2017 16:59:46 GMT
Well there is a valid answer to that question now. I wonder how many pots over £5k will also be liquidating? Not sure I follow - why would they be liquidating? And also in addition to who else? Perhaps the 50% increase in fees for pots up to 25k.
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Post by Deleted on Apr 10, 2017 17:00:35 GMT
@yescautious "Not sure I follow - why would they be liquidating? And also in addition to who else?"
You'll see the increase in BM fees for everybody pretty soon, as well as Bondmason stating they don't want any accounts <£5k. No-one will maintain the 7% net target before defaults. BM is going to increase fees? I apologise as I might have missed other parts of the thread - although I had a quick look just now - but also, why £5k in particular?
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Post by dan1 on Apr 10, 2017 17:02:07 GMT
@yescautious "Not sure I follow - why would they be liquidating? And also in addition to who else?"
You'll see the increase in BM fees for everybody pretty soon, as well as Bondmason stating they don't want any accounts <£5k. No-one will maintain the 7% net target before defaults. BM is going to increase fees? I apologise as I might have missed other parts of the thread - although I had a quick look just now - but also, why £5k in particular? I guess that they can only sustain their operation for "small" investors at > £75 pa in fees.
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adrianc
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Post by adrianc on Apr 10, 2017 17:14:34 GMT
@yescautious "Not sure I follow - why would they be liquidating? And also in addition to who else?"
You'll see the increase in BM fees for everybody pretty soon, as well as Bondmason stating they don't want any accounts <£5k. No-one will maintain the 7% net target before defaults. BM is going to increase fees? I apologise as I might have missed other parts of the thread - although I had a quick look just now - but also, why £5k in particular? You'll probably have seen the email by now, but... p2pindependentforum.com/thread/8549/updated-cs-effective-31-2017
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TheDriver
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Post by TheDriver on Apr 16, 2017 21:00:06 GMT
It's interesting that now fees have been increased the BM promotions seem to be quoting a target return of 8%. Previously it was 7% after fees, which have increased by up to 0.5% meaning a net return of 6.5%.
The platform fees are mentioned, but it isn't clear that they reduce the higher figure! I would have hoped that the increase in fees would have enabled the platform to source more lucrative deals to more than compensate the additional costs, but apparently not.  A somewhat disingenuous presentation of expectation.
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ashtondav
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Post by ashtondav on Apr 17, 2017 10:14:28 GMT
I thought BM always quoted a target return of 8%. Under the old charge of 1% that netted down to 7%. Under the new charge of 1.5% it nets down to 6.5%.
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TheDriver
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Post by TheDriver on Apr 17, 2017 18:19:43 GMT
Yes, quite correct :-) I didn't make the point very well, but the new ads I've seen quote the same target return of 8%, but it's not clear that it will be reduced by the fees; presumably they have changed the format due to the variable charge meaning they can't quote a specific net figure.
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Post by stevefindlay on Apr 17, 2017 18:31:01 GMT
The gross return target is the same as its always been: 8.0% p.a.
Because the fees are now banded - from 1% to 1.5% - rather than quote a range for the net return target of 6.5% - 7.0%; we moved to quoting the gross target figure, and made it clear throughout the site that this is before fees.
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A somewhat disingenuous presentation of expectation.