Post by stevefindlay on Aug 15, 2016 10:00:57 GMT
Am I right in thinking that there are strong "Collective" elements to investing in BM not present in most P2Ps. In particular, following the introduction of its recent software, parts of investors loans will be exchanged for others to get the overall position closer to an allocation of all loans held by the platform (subject to minimum loan size). There is no direct relationship between an investor and the borrower (or indeed the platform / arranger who administers the loan and sold it to BM). Instead, there is a contractual arrangement with a trustee company that holds the receivables (or alternative structured assets from some platforms) for the benefit of the investors, agreeing to allocate an investors share of any repayments for the benefit of the investor concerned, while this right may be sold on to another investor on the initial investors behalf.
this allows a rapid allocation to a diversified portfolio, but no right to retain any specific receivable.
It would be interesting to know how BM would respond if the target return fails to be achievable as a result of reduced interest rates. I believe that this may occur if a significant number of the P2P platforms utilised by BM were to introduce ISAs or perhaps even significant competitors to them.
In addition, please would you explain what happens with loans in arrears. Will these remain with the investors holding them when they fall into arrears (or after an agreed rectification period)? Or might these be reallocated to equalise the losses or returns between investors?
"specific receivable" - yes, you do have the right to a specific Receivable in every case. Please click the link next to your holding to see the legal doc relating to that Receivable reference.
"target return" - there two points here:
(1) can our clients continue to get this: we feel 7.0% +/- 0.5% is a reasonable long-term sustainable target based on good credit disciplines.
(2) how P2P platforms may respond to over supply of (ISA) capital: we've already seen the over-supply of capital problem for specific platforms, who have reduced their lending disciplines as a result. Just because you have more investor capital, doesn't mean the credit quality has improved. We would be very wary of any platform that does this, and likely not invest through those that reduce lending rates just because they have more investors.
"arrears" - yes, they are 'frozen' with each investor. In these scenarios, we do everything we can to chase down that debtor for the benefit of our client(s) - this is where our alignment to our client's interest is very important. Non-performing loans are not reallocated amongst clients.
"reallocation of losses" - no, we don't reallocate losses.