Greenwood2
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Post by Greenwood2 on Mar 2, 2017 8:11:47 GMT
I have been invested for about 9 months and haven't added or removed funds for the last 4-5 months. I just did an estimate of my actual annual interest rate based on the data from the last 4 months (pretty much steady state) and get an estimate of 5.6%. I also have about 1% default to subtract from that. Unless something changes radically I don't see how I will get anywhere near the 7% target rate.
And I will pay tax on the interest before deduction of fees that will reduce that rate further.
I like the concept of Bondmason, but it doesn't seem to be working for me as a fire and forget target 7% interest rate platform.
Edit: Correction I had taken off the 1% default in my original post so have now changed 4.6% to 5.6%, if anyone saw it!
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littonowl
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Post by littonowl on Mar 2, 2017 11:19:05 GMT
I have been invested for about 9 months and haven't added or removed funds for the last 4-5 months. I just did an estimate of my actual annual interest rate based on the data from the last 4 months (pretty much steady state) and get an estimate of 5.6%. I also have about 1% default to subtract from that. Unless something changes radically I don't see how I will get anywhere near the 7% target rate. And I will pay tax on the interest before deduction of fees that will reduce that rate further. I like the concept of Bondmason, but it doesn't seem to be working for me as a fire and forget target 7% interest rate platform. Edit: Correction I had taken off the 1% default in my original post so have now changed 4.6% to 5.6%, if anyone saw it! I have been drip-feeding, so its a little harder to gauge, but suspect I'm also falling a little short of the indicated rate on my dashboard too (& after taking into account the 1% fee). Like you, I also like the BM concept, and in particular stevefindlay 's openness, so am hoping that the monthly returns pick up as the portfolio matures. Monthly statements would be a great help to this regard, and I understand they are on their way...?
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fogey
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Post by fogey on Mar 2, 2017 12:38:56 GMT
This is my first foray into p2p and my first post here too. I have just completed my first 90 days with BM. I have plotted my cumulative daily balance returns against a reference investment of 7% pa and I will endeavour to upload this shortly. As expected there is a time lag in the comparative performance due to the initial ramp up, but eventually these two plots should track each other if the 7% target is to be met. If it exceeds 7% then these two plots should eventually meet. I have also plotted the daily XIRR and will endeavour to upload this too.
From my current plots the comparative performance with the 7% target line has recently started to diverge, after initially having a very close track. This is tending to show that the 7% target is becoming more difficult to attain as time goes by. From the XIRR plot, this has recently started to flatten out just below 5%, again showing that the 7% target is going to be very difficult to reach, if at all.
Analysing the accrual rate from the "quiet" daily rate of uplift in the cumulative balance, it appears to be set just above 7%. However I have recently had two days where there has been a negative daily balance return. These have a significant effect on the projected long term target and explain why there is a growing divergence away from the 7% reference plot. They also cause the XIRR to flatten as you might expect.
I have mailed BM for an explanation of these two loss days but have had no reply as such. As the low rate loans on my allocation list appear to be clumped together on the same day, one possibility is that they may all mature on the same day. In this case the conversion from accrual to paid could easily cause a daily loss. It is also interesting to note that all the loans within these periodic clumps are at identical rates.
I am wondering if anyone else here has witnessed sporadic one day losses in their daily balance returns and also the clumping of low rate loans within a single allocation day. By low rate I am referring to loans below 7% of course. I will try and upload my plots in a later post on this thread.
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Greenwood2
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Post by Greenwood2 on Mar 2, 2017 13:21:02 GMT
I would expect a lot of variability day to day, not sure how you would get a loss though, fees being accrued?
Edit: I tend to just do a monthly check of the 'actual' rate that month, ie, Interest/Total on platform.
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fogey
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Post by fogey on Mar 2, 2017 13:28:22 GMT
Thanks for the reference on posting images here. I had not looked into this previously so any advice on the best way forward is greatly appreciated. I have also incorporated my two plots onto a single word page file, which includes some explanation text too. Is there any easy way to post this or is it better to post the two plots separately ? As you may already gather, I am not an expert at using uploads here !
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fogey
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Post by fogey on Mar 2, 2017 13:39:02 GMT
My meaning of a "daily loss" is where the balance at the end of that day is less than the end of the previous day. This is very easy to check providing you log your daily balance at the end of each day. In the absence of any other change (my meaning of a "quiet" day) the daily balance increment can be multiplied by 365 and then divided by the total amount deployed to give an indication of the accrual rate. This is where I currently see a result of 7.1% to 7.2%.
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arbster
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Post by arbster on Mar 2, 2017 13:43:30 GMT
I am wondering if anyone else here has witnessed sporadic one day losses in their daily balance returns and also the clumping of low rate loans within a single allocation day. By low rate I am referring to loans below 7% of course. I will try and upload my plots in a later post on this thread.
Yes, I've seen this, as recently as yesterday, with the balance being a few tens of pence (40p I think) lower than the previous day. I took this as being a discrepancy between the accrued and actual interest paid, and possibly an artefact of the aggregation process, but would welcome an explanation from BM if one is forthcoming.
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fogey
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Post by fogey on Mar 2, 2017 14:10:15 GMT
I have also incorporated my two plots onto a single word page file, which includes some explanation text too. Is there any easy way to post this or is it better to post the two plots separately ? Sure, you can add an attachment (using the 'Add Attachment' button top-right of the Create Post window) but I would suggesting saving the Word document as a PDF file as pretty much everyone can deal with PDF whereas application specific documents can be trickier to open. Thanks I will give this a go in a short while. I have not previously converted to PDF but I suspect there will be a tool there on my word program to do this. Fingers crossed !
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Greenwood2
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Post by Greenwood2 on Mar 2, 2017 14:13:18 GMT
My meaning of a "daily loss" is where the balance at the end of that day is less than the end of the previous day. This is very easy to check providing you log your daily balance at the end of each day. In the absence of any other change (my meaning of a "quiet" day) the daily balance increment can be multiplied by 365 and then divided by the total amount deployed to give an indication of the accrual rate. This is where I currently see a result of 7.1% to 7.2%. Pretty much what I do, but monthly not daily, I'd never remember.  When you say amount deployed is that the amount on loan? I use the amount on the platform to take into account unlent money, it would be interesting to do both.
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fogey
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Post by fogey on Mar 2, 2017 14:54:41 GMT
I am wondering if anyone else here has witnessed sporadic one day losses in their daily balance returns and also the clumping of low rate loans within a single allocation day. By low rate I am referring to loans below 7% of course. I will try and upload my plots in a later post on this thread.
Yes, I've seen this, as recently as yesterday, with the balance being a few tens of pence (40p I think) lower than the previous day. I took this as being a discrepancy between the accrued and actual interest paid, and possibly an artefact of the aggregation process, but would welcome an explanation from BM if one is forthcoming. Yes this is exactly the process I would expect here. But as the accrual rate is set just above 7% ( my latest calculation gives a result of 7.13%), then the accrued to paid conversion for that day should only give a negative result if that loan has given a poor return. Furthermore the weighting of that negative loan contribution would need to be larger than the positive contributions from all your other loans on that day. I would assume that this positive contribution is reflected in the steady positive daily accrual rate. This is why I am thinking that such daily losses may be caused by the simultaneous maturity of a number of several short term low rate loans or possibly the maturity of a single poorly performing loan over a long term.
Such events will always cause your total returns to detract from the 7% target. The larger these day losses become and the more frequently they occur, then the more they will reduce your total returns. If you are to meet the 7% target, then these losses need to be very small indeed and also very infrequent. My charts will help to illustrate this, provided I can upload them ( hoping to do this before tomorrow ! ).
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Post by stevefindlay on Mar 2, 2017 17:17:53 GMT
I am wondering if anyone else here has witnessed sporadic one day losses in their daily balance returns and also the clumping of low rate loans within a single allocation day. By low rate I am referring to loans below 7% of course. I will try and upload my plots in a later post on this thread. [ arbster] - please see this explanation on our Help and FAQ page (https://www.bondmason.com/help-faq) Why does my overall balance sometimes fluctuate by small amounts (go down as well as up)?Small fluctuations from day to day can be explained by how Accrued Interest is converted into actual Cash Interest: - Accrued interest on your account is based on a calculation of the interest rates on each underlying loan and the estimated repayment date - The actual amount of interest received can be different to the actual amount of interest estimated: for example the borrower may repay early - When we process the loan repayment information - which may have a processing delay of 2-5 days depending on when we are notified by the underlying third party platform - the estimated accrued interest is then converted into actual paid cash interest - This conversion can lead to a small decrease or increase in your overall balance. But you will always see an increase (only) in the amount of cash interest in your account
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fogey
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Post by fogey on Mar 2, 2017 18:37:04 GMT
Obviously some loans are not performing as expected when the accrued to paid interest conversion has an unexpected negative influence on the total returns. But the more frequent and severe these incidents become, the more likely the target rate of 7% will not be met.
Some of these incidents may be classified as "known unknowns", especially where a loan is repaid early for example or where minor accounting errors are identified. But there are also likely to be "unknown unknowns" having regard to the handling of so many sets of data which cannot be fully automated.
So within all these unknowns there is an element of risk in reaching the 7% target. As the background element of the daily balance increase is just above 7% of the total investment amount (which I had assumed to be the accrual rate), any sudden changes which cause the daily balance return to fall into negative territory will soon cause the target rate to be missed, as my pending plots will show.
It is the accumulated balance returns that determine whether the 7% target is met and as soon as these start to significantly deviate from expectations then this target is at risk.
I am not clear about the remark regarding interest earned on cash, does this mean that sometimes part of deployed funds are treated as cash ?
I believe there is no interest paid on the "cash in bank", especially when it is awaiting deployment in the initial ramp up.
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fogey
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Post by fogey on Mar 2, 2017 21:00:44 GMT
First attempt at attaching my pdf failed not sure why here is second attempt ... Success I will keep these plots up to date and post here each month. Has anyone here actually achieved the 7% target ?
Attachments:90days.pdf (119.16 KB)
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Post by stevefindlay on Mar 2, 2017 21:30:55 GMT
Obviously some loans are not performing as expected when the accrued to paid interest conversion has an unexpected negative influence on the total returns. But the more frequent and severe these incidents become, the more likely the target rate of 7% will not be met.
Some of these incidents may be classified as "known unknowns", especially where a loan is repaid early for example or where minor accounting errors are identified. But there are also likely to be "unknown unknowns" having regard to the handling of so many sets of data which cannot be fully automated.
So within all these unknowns there is an element of risk in reaching the 7% target. As the background element of the daily balance increase is just above 7% of the total investment amount (which I had assumed to be the accrual rate), any sudden changes which cause the daily balance return to fall into negative territory will soon cause the target rate to be missed, as my pending plots will show.
It is the accumulated balance returns that determine whether the 7% target is met and as soon as these start to significantly deviate from expectations then this target is at risk.
I am not clear about the remark regarding interest earned on cash, does this mean that sometimes part of deployed funds are treated as cash ?
I believe there is no interest paid on the "cash in bank", especially when it is awaiting deployment in the initial ramp up. Sorry if my explanation is unclear. And to set your mind at ease, there are no unknown unknowns. Everything is always fully reconciled and cross checked. To illustrate with an example (for why processing can lead a downward movement in your overall balance): - 1 Feb: you buy a loan part for £100 with a 12% interest rate - Your account is credited daily with an accrued interest amount (at the rate of £1.00 per month e.g. ~3p per day) - 1 March: your account balance shows £101 with respect to this loan - 3 March: we are notified by the underlying platform that the loan repaid in full on 27 Feb - 3 March: your account is credited with the capital repayment, your share of the cash interest and the accrued interest goes to zero - Because the actual cash interest is 97p but your accrued had ticked up to 1.06p your account will show a reduction of 9p. Hopefully that clarifies why this can happen. We do put a buffer into the accrued interest calculation to account the for this processing delay, but there is no way to get the accrued portion 100% right all of the time. Over time, the relative impact of this on your account becomes less and less.
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Post by stevefindlay on Mar 2, 2017 21:35:44 GMT
My test portfolio is currently just over £15k, of which £10k was put in during Aug-Sep and £5k in Dec-Jan. I've always set the loan allocation to 2% of NAV. The IRR is 6.49% which is disappointing given the typical yield on the portfolio (at least according to the site is around 8.7%-9.0%, pre-fees). Unencumbered cash seems to sit between 5-25% (currently 11%) which probably explains the issue though it's not clear whether I've had any crystallized defaults. Bondmason simply provides no cashflow reporting so it's hard to get any grasp on what is really happening. Invoices are a major part of my BM portfolio and it's hard to keep capital deployed since invoices roll-off as fast as they are originated. This replicates the issue I've experienced with MarketInvoice where deployed capital rarely gets above 80-90%. I intend to continue the experiment for a full 12 months to get a fairer representation of the returns. At 6.5%, I'm not sure it really cuts it as a diversified lending product. However, if BM could offer an "invoice only" version at 6%+, taking invoices off a variety of platforms, then I think it would be a decent replacement for MI. I use MI as a 30-60 day liquidity product so the hurdle rate for returns is obviously lower given the shorter duration. - thank you for sharing this. To pick up on one point here - we are doing less and less invoice discounting lending. Sorry if this is a disappointment, but the quality we are seeing doesn't match our expectations or desired level of performance in many cases. There are a few expectations to this though.
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When you say amount deployed is that the amount on loan? I use the amount on the platform to take into account unlent money, it would be interesting to do both. 
