Investment Performance - targeting 7.0%+ p.a.

Yes I am already seeing an effective annual return of 7.1% to 7.2% on my deployed funds each day, so I am assuming this is my accrual rate at the moment. To get this return over a full year I would have to remain close to 100% deployment nearly all the time, so one obstacle would be the speed at which I could get the matured short term loans redeployed. These come up frequently so it is a continual problem.

But the real flies in the ointment that I see now are the sporadic one day losses, which seriously clobber the 7% target and I have already seen two of these within 7 days towards the end of last month ( See my 90days.pdf attachment to my previous post here). I am thinking that you certainly did not experience any of these sporadic losses in your excellent results for last December.

I am really not sure that SF's recent explanation given to me here can fully account for the way this scale of loss might occur for a typical account holding of 50 loans at 2% allocation, so I may need to specifically address that issue in a later post.

Thanks for this explanation and I can see why an investment in three similar part loans can give a combined accrual rate of 9p per day and how the process outlined above can cause a total loss of accrued interest for that day. I have already termed such days as "sporadic daily loss" days and during my first 90 days here I have already seen two such days which clobber the target 7% very hard indeed, at least in the short term, so I am looking for possible causes.

Whilst your example above is valid for an investment in three part loans, this is far from the typical situation where the investment is spread around 50 loan parts for a 2% allocation. When I had my two sporadic daily losses I had well over 50 loan parts.

For this typical situation and using your process outlined above for 50 similar loan parts, there would be a combined accrual rate of £1.50 per day and therefore the loss of only 9p would have a very minor impact on the end of day balance. I am therefore still unable to understand what has happened during my two days of complete loss of return. In fact the scale of the losses extended further, so that it took not only the full loss of one day's accrual but also a significant part out of the previous day's return too.

My view of the accrual rate is that most of it should come from long term loans (greater than one month) and this should form a stable base on which the shorter term loans will provide a more variable daily component. For a full loss of income over a day it means something has happened which has destroyed that stable base and this appears to becoming more frequent as time goes by, which is contrary to what I might expect. The longer I invest here, the more stable my daily returns should be.

Because loan information across many platforms may be processed in batches (in accordance with how data is supplied to us). So you may have 20 out of 50 loans being processed on a single day.

The target return of 7% is after 12 months, but I recognise based on the numbers you've shown here, that 6.5-6.75% may be more likely in your case. You are very welcome to liquidate at any time - we aim to provide this flexibility for all clients.

As one with an invested interest in BM, I've been reading these threads for the last few months.

I have a reasonable sum in there, with a good chunk, about 35% currently undeployed (a large amount of invoices recently repaid).

BM sure are getting a bashing over deployment, but in all honesty, are we comparing with the ability to deposit a larger chunk of our funds into loans that might even be of dubious quality? That may be most of us here. Their issue, if you can call it that, lies in part with their strict deployment rules and the availability of loans. If you deposit 10k, they consider that your entire pot. Now if you 100% restrict yourself to deploying that in 2% chunks, you have 50 new decent quality loans to find. Even signed up to half a dozen or so different DIY platforms, I have found that hard within a month or even 3. I have cheated by putting larger sums into some longer term loans with the idea of reducing on SM later and diversifying further. BM cannot do this (idea - or maybe they could, even at lower rates?) and when I honestly ask myself if I could do better, I struggle to say yes. That is not to say I do not beat their return. I do, but I'm putting some effort into doing so and accepting a degree of higher risk too.

I think BM is a great idea. But comparing it to what a lot of us doing here on the other platforms is wrong I think. If you take it for what it is, a separate, completely hands off platform with strict investment parameters, I believe it's doing what it should. Sure, my return if you take into account the undeployed funds is well below the advertised target rate, but it's early days still and I did add along the way (stopped now). If I think about the amount I have sitting in my NS&I account at .75% (soon to be .5%), waiting to be deployed, I really am not able to improve on that much myself (at least not without incurring additional risk).

I am looking to keep using BM and will likely refer my parents to it shortly too, but as a longer term hands off investment (they'd be lost with the DIY approach). I'm resigned to the fact that it may take quite a few months to be almost fully deployed and that I may make less than the 7% target, certainly for the first 6 months (taking into account undeployed funds), but as a part of my overall picture, I'm still OK with it and am convinced the longer I leave it there, untouched, the closer to that target rate I will get. I kinda wish people would stop comparing it, apples to oranges as they say. It's a partion of my overall strategy and as that, I think it has promise.

I look forward to a facility on the platform which tells me on a rolling basis exactly what my personal returns are and have been since last August. The current headline rate on my account of around 9% (oops, dropped to 8.37% today) is irrelevant to me; what is relevant is a figure after fees and after allowance for actual experienced cash-drag. Then there will be defaults to consider.

I have been with BM since last August, and after the initial time to deploy funds, seem to have been jogging along with (usually) around 90% deployment (a bit higher if I put no more money in*!) and an approximate return after fees and before defaults in the region of 6.9-7.1%. (Today I calculate my figure to be 6.96% tomorrow will be different.)

I'm too dim to "do" spreadsheets, but I would concur with those suggesting XIRR 6.5-6.75% over the eight months, so still fairly close to "target", but only just. There is no wriggle room for defaults yet.

* I've had three of those famous "your funds are 100% deployed" e-mails, but they never apply for longer than a day or two.