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Post by valueinvestor123 on Aug 22, 2017 13:57:28 GMT
Happy to see the QAA etc accounts are more transparent now. You are now able to see what loans you are invested in which is an improvement.
Is there information on what the mandates are for each of the 'auto' accounts? (i.e. what the maximum weightings will be). From quick glance, i notice that (lack of) diversification might be an issue. Particularly in the Property account, I seem to have about 17% of my investment in one loan and over 50% in the top 4 loan holdings (I would never diversify this way if I invested in individual loans and it's not clear what the limits are & if there are any). The low rate is in my mind not justified for this lack of diversification.
AC platform reminds me a bit on a Split Capital Investment Trust, with various share classes. I always found it hard to get my head around assessing the risks on these because they had a domino effect-like quality to them, in terms of risk & performance.
I am still in favour of more simplified & more transparent lending with peer2peer platforms. (Lend against an independently & conservatively valued asset, hold to maturity/no secondary market, no provision fund complication = pass on higher rates to lender). In the end, the platform will only be as good as the underlying security/recovery success. No clever structuring around it will change this (IMHO).
Any news on FCA authorization/IFISA yet?
vi123
Edit: AC is now my 4th largest peer2peer investment as I transferred more funds in the last couple of weeks into various accounts.
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Post by valueinvestor123 on Aug 25, 2017 10:15:47 GMT
Having been transferring money for a couple of weeks to the PSIA now and trying to understand the account mechanisms better, I think: "spread your risk across a broad range of autodiversified loans" is quite a misleading description as well. Having most of my investment in 4 loans so far is not something that can be called "broad range" nor "diversified".
Does this change over time? Does one become more diversified? Octopus Choice (as a comparison) gives you a much better diversification from the start. You need at least 20-30 loans for the word 'diversified' to have any meaning.
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ashtondav
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Post by ashtondav on Aug 25, 2017 10:26:23 GMT
I suppose the argument is that you don't need diversification if there is a Provision Fund. However, as this may take a year or two to pay out, you can be in deep doo doo, if you have only 3 or 4 loans. Most provision funds pay the monthly capital and interest payments of delinquent borrowers. AC does not.
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Post by valueinvestor123 on Aug 25, 2017 10:45:49 GMT
I suppose the argument is that you don't need diversification if there is a Provision Fund. However, as this may take a year or two to pay out, you can be in deep doo doo, if you have only 3 or 4 loans. Most provision funds pay the monthly capital and interest payments of delinquent borrowers. AC does not. Whether diversification is needed and if the provision fund mitigates any risks in practice or not is probably a separate argument from having a misleading description in the account heading. Investors should be able to decide for themselves what they need, based on reliable descriptions of the product.
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ashtondav
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Post by ashtondav on Aug 25, 2017 16:12:09 GMT
I agree.
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Post by yorkshireman on Aug 25, 2017 18:53:00 GMT
I suppose the argument is that you don't need diversification if there is a Provision Fund. However, as this may take a year or two to pay out, you can be in deep doo doo, if you have only 3 or 4 loans. Most provision funds pay the monthly capital and interest payments of delinquent borrowers. AC does not. Investors should be able to decide for themselves what they need, based on reliable descriptions of the product. Tell Funding Circle that!
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registerme
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Post by registerme on Aug 25, 2017 19:23:48 GMT
This comment is about GBBA rather than QAA, but it may still be relevant (I haven't performed a similar analysis on my QAA holdings). My GBBA account has 77 non-zero holdings ranging in size from the largest which is >10% of the portfolio to £2 e-20 for the smallest. The largest holding is actually over ten times the size of the average holding. The standard deviation is, unsurprisingly, huge. I don't know what drives the diversification algorithm but it doesn't work in a way that I like, think is appropriate, or understand. It's not going to stop me using AC as a platform but I do think it's an area where AC could improve. chris, stuartassetzcapital, any comments? If there turns out to be a meaningful difference between how the QAA and GBBA algorithms work I'll split this post, and any responses, out into a separate thread. |
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jonah
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Post by jonah on Aug 25, 2017 20:29:52 GMT
registerme the QAA uses a simple proportioned view of what the whole account (50 ish million) is holding. The GBBA has specific investments. It seems to buy up to a max of 20%* but you get very high spreads due to loan availability. E.g. 413 was I assume quite high on a lot of GBBA owners loan books due to over 1m of parts being in the GBBA**. But the recent 12%er is only 8 ish quid each. Obviously availability of cash to buy influences, but currently beyond the max of 20%* there doesn't appear to be any current balancing algorithm at work***. *at the time of purchase. You could in theory have a GBBA 100% in a single loan if you invested cash, got one loan then withdrew the rest of the money, I believe based on how I think it works. ** based on the sudden size of the selling pool. *** historically there was an algorithm in use but it didn't seem to quite achieve the desired results. I suspect fixing that or something similar will be on chris to do list, but I also suspect that list is very long and this isn't near the top.
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registerme
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Post by registerme on Aug 25, 2017 22:33:08 GMT
Thank you jonah that was interesting. I guess it's your AC's *** that I am interested in  . |
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jonah
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Post by jonah on Aug 26, 2017 7:58:10 GMT
Thank you jonah that was interesting. I guess it's your AC's *** that I am interested in . My algorithm would be a simple proportional rebalancing once a day for all loans except those untradeable at the time. there are other simple approaches I've thought about occasionally. I think chris linked here en.m.wikipedia.org/wiki/Genetic_algorithm to his preferred approach at the time. Being honest, it goes way over my head, but that is a cool antenna!
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Mike
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Post by Mike on Aug 26, 2017 11:32:20 GMT
The GBBA is broken. I have the following:
Account A - selling entire GBBA holding (£x let's say). Only one suspended.
Account B - buying additional £5x in GBBA.
For almost a week that has been the case without much progress (there has been a few inches gained) in either account. I manage both accounts so I know for sure that account B should be buying holdings that are available on the market, long before any 20% limits are hit.
If anyone can explain why my buy and sell orders can't be filled in the situation above I'd love to know what logic the guys at AC employed to implement such a system where matching orders takes over a week.
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ceejay
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Post by ceejay on Aug 26, 2017 14:03:58 GMT
The GBBA is broken. I have the following: Account A - selling entire GBBA holding (£x let's say). Only one suspended. Account B - buying additional £5x in GBBA. For almost a week that has been the case without much progress (there has been a few inches gained) in either account. I manage both accounts so I know for sure that account B should be buying holdings that are available on the market, long before any 20% limits are hit. If anyone can explain why my buy and sell orders can't be filled in the situation above I'd love to know what logic the guys at AC employed to implement such a system where matching orders takes over a week. Could it be that the loans being held by Account A (that you're trying to sell) are already held to whatever GBBA considers to be the max in Account B, so it won't let you buy any more of those?
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Mike
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Post by Mike on Aug 26, 2017 15:05:17 GMT
Could it be that the loans being held by Account A (that you're trying to sell) are already held to whatever GBBA considers to be the max in Account B, so it won't let you buy any more of those? This is extremely unlikely based on the holdings in the different accounts especially given the difference in total size. B has unmatched investment allocated which is several times the total value of A's holdings.
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Post by stuartassetzcapital on Aug 27, 2017 13:54:10 GMT
It is true that QAA is perfectly diversified across investors and also that GBBA currently uses an older algorithm that is less perfectly diversified but this is scheduled to be updated.
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ashtondav
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Post by ashtondav on Aug 27, 2017 15:57:20 GMT
Good!
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