davidg
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Post by davidg on May 7, 2014 15:23:07 GMT
I'm trying to decide whether to give up on Funding Circle or not.
I thought I'd give it a try with a small fraction of my savings. After 1 year of investing, my summary figures are:
- Gross yield 8.4%
- Annualised return 2.2%
- Estimated fully diversified return 5.8%
My investment was spread over 100 (ish) loan parts to 100(ish) companies.
I mostly used Autobid to buy and sold off a few loan parts that looked dodgy to me immediately after I'd bought them. I simply don't have the time to spend on doing a my own due diligence and relied mainly on Funding Circle's evaluation. This does not seem to have been a good strategy, gross return of 2.2% .
I was just about to cash in all my loan parts and get out of Funding Circle, giving it up as a bad job, but I thought I'd ask for the opinions of those wiser in the ways of Funding Circle than me.
What do you think?
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ianb
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Post by ianb on May 7, 2014 15:28:41 GMT
I'd advise quit. You can get almost 5.8% at RS without having to worry about defaults, and having to spend a lot less time. Far better rates at either ReBS or AC.
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blender
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Post by blender on May 7, 2014 16:06:00 GMT
You have not told us the important information - your income tax position (and best not to post that on the forum). I guess from your numbers that if you are a basic rate tax payer then your earnings after tax will be about 1% (have you downloaded a tax statement?). And if a higher rate tax payer you may have made a loss. And you may have other loans late or risk band removed which could become further losses without tax reduction.
You started at exactly the wrong time (but could not know that) and using Autobid probably created a mediocre portfolio and you cannot now fix that at any speed without selling most and starting again.
So if I were in that position and any sort of income tax payer, and knowing that the next year could be as unpredictable as the last, then I would sell up (which may not be quick or easy) and put my money in an interest bearing savings account or bond. (That's what I would do -but that is not advice to you and I and others are not qualified to give it, you decide for yourself).
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Post by rudry2677 on May 7, 2014 16:20:33 GMT
I'd advise quit. You can get almost 5.8% at RS without having to worry about defaults, and having to spend a lot less time. Far better rates at either ReBS or AC. I agree with ianb. In fact, I am surprised that anyone need ask about gambling with FC. Very few punters win when gambling on three legged horses judged by Risk Assessment folk as having a good chance of getting to the finishing line.
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blender
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Post by blender on May 7, 2014 16:32:52 GMT
I'd advise quit. You can get almost 5.8% at RS without having to worry about defaults, and having to spend a lot less time. Far better rates at either ReBS or AC. I agree with ianb. In fact, I am surprised that anyone need ask about gambling with FC. Very few punters win when gambling on three legged horses judged by Risk Assessment folk as having a good chance of getting to the finishing line. That's a bit unfair; you can expect around 6% before tax with FC. The question was whether or not to get out - not where else to go, and I think we agree that the portfolio is so poor that it is best sold.
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Post by GSV3MIaC on May 7, 2014 16:45:43 GMT
Yep, I'd say 'sell up' too. Quit using autobid .. Better to buy parts on secondary market if you can't be in at auction ends .. That way you can do some duedil, or at least get a good (above avg for sure) rate. However for a simple life, rate setter looks good .. FC is more of a financial PC game.
Sell rubbish at par .. Mark up the rest as appropriate, if you have time to check out the market
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dorset
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Post by dorset on May 7, 2014 16:56:42 GMT
The two are of course inter-linked – to leave means that funds have to be parked somewhere else. You cannot consider one without the other.
I’ve said before that doing FC without Autobid is something of a hobby activity. I am lending to over 800 separate businesses. The time it has taken me to build this portfolio without Autobid means that I am “working” for less than the minimum wage. This would suggest that if you don’t have lots of time (and patience) then you should get out (easier said than done with a slow SM).
Using Autobid to invest however is IMHO a complete mugs game and will give returns less than the average – higher than average going to the “active” investors.
I agree RS is the obvious choice.
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oldgrumpy
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Post by oldgrumpy on May 7, 2014 17:03:13 GMT
Yes, your figures are poor, probably because of auto-bid. You must have had several defaults. As most others, I only came into all this because of the cynical attitudes and practices of the banks, and building societies, encouraged by government policies. The " we make profits, borrowers MUST have low rates or the economy collapses, while you lose value" policies. You provide the cash, and you are the overall losers!!! Well, I am about to begin my gradual exit from FC. There are alternatives now (which I don't think FC or Zopa have really got to grips with). My figures after 18 months (according to them; we all know that actual rate is rather lower) with a few defaults are Gross 10.6% Annualised etc 7.2% Est fully div. 6.9% ...could be worse, but I have avoided auto-bid and the whole platform takes far too much of my time. Also I have grave doubts about the integrity of the FC platform now. It's hard to say who is to blame. Currently I am looking at Ratesetter, Wellesley, Assetz and SavingStream (though I am unsure about them). FK is another possibility, but I'm not completely convinced by them yet. Zopa is another "bye-bye" venue. I would certainly get out of FC with davidg figures - especially if spending time judging each loan's possibilities was not convenient. I'm lucky in that I do have spare time - but there are more interesting things to do with it. |
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Post by batchoy on May 7, 2014 17:05:38 GMT
I would get out, as for an alternative, if you are unable/not interested in doing DD then have a look at Wellesley. I am currently running down my FC, RS, and Zopa accounts, and my FK account is just ticking over reinvesting funds.
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ton27
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Post by ton27 on May 7, 2014 17:27:09 GMT
@batchboy
I have also been running down Zopa but I would be interested to know why RS is on your list to "run-down".
Also, I agree with batchboy, if it is not possible to do DD then FC is not a good option.
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Post by batchoy on May 7, 2014 17:53:45 GMT
@batchboy I have also been running down Zopa but I would be interested to know why RS is on your list to "run-down". Also, I agree with batchboy, if it is not possible to do DD then FC is not a good option. The run down on RS is simply down to personal choice, as I currently prefer the Wellesley model - no waiting to get interest. PS there is only one 'b' in batchoy youtu.be/RV3b39V18Nk
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blender
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Post by blender on May 7, 2014 21:43:47 GMT
...Also, I agree with batchoy, if it is not possible to do DD then FC is not a good option. This may seem like heresy but I think due diligence is over-rated. Yes you can rule out the obvious risks with look at the financials, but that only establishes that the business is creditworthy at present - it tells you little about the future and we have no business plan and no ongoing supervision to make that due diligence valid for more than a few months. My experience is that you can avoid a number of defaults by selling after bad news, recoveries from late or from RBR for example, and also by churning the loans so that the greater the risk (mainly the band), the shorter time you keep the loan. A minute or two's evaluation of the loan cannot really be called due diligence, can it? My figures after 20 months, and coming up to my first £10k net earnings (I see no point in spending the time on small investments) Gross 10.7% Annualised net 8.8% Fully diversified 7.1% But 4907 could screw those figures up. (no amount of due diligence would have saved me for RBR on that one after a few days)
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Post by bracknellboy on May 7, 2014 22:09:12 GMT
...Also, I agree with batchoy, if it is not possible to do DD then FC is not a good option. This may seem like heresy but I think due diligence is over-rated. Yes you can rule out the obvious risks with look at the financials, but that only establishes that the business is creditworthy at present - it tells you little about the future and we have no business plan and no ongoing supervision to make that due diligence valid for more than a few months. My experience is that you can avoid a number of defaults by selling after bad news, recoveries from late or from RBR for example, and also by churning the loans so that the greater the risk (mainly the band), the shorter time you keep the loan. A minute or two's evaluation of the loan cannot really be called due diligence, can it? My figures after 20 months, and coming up to my first £10k net earnings (I see no point in spending the time on small investments) Gross 10.7% Annualised net 8.8% Fully diversified 7.1% But 4907 could screw those figures up. (no amount of due diligence would have saved me for RBR on that one after a few days) Pretty spot on. I think there is a tendency to overrate the power of individual due dil on a platform like TC. Too little information/forward bus plan: and that's even if one is capable of assessing that information if it was presented. Best one can hope for is summary assessment of financials and 'sniff test' of the business model and borrower's interaction (which is why Q&A 'feels' important: its how someone responds, not what they respond with: but no response is not itself necssarily a downer). But that isn't a case for auto bid, or maybe it is ?? Maybe its the 'control' thing, but I like to think that the 80:20 rule applies: that the min.m level of assessment and sniff test yields a disproportinate benefit by weeding out the worst of the worst. Likewise I've not seen the point of working FC unless its with a reasonable chunk on every loan I participate in: which is why I 'bleed' whenever one goes bad. Given 20 months etc., what's your spread (number of loans) and how much use of the SM have you made for buying ?
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jimbo
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Post by jimbo on May 7, 2014 22:59:48 GMT
Interesting and similar to the experience my Father's FC account had with autobid, which was largely active throughout 2011 and early 2012. I recall an annualised return of sub-2% and stakes in some of the old favourite defaulters sometimes mentioned here. I took over his account and started running it manually in line with my own. He now has a gross yield of 12%, an annualised return of 4.4% and an Estimated fully diversified net return of > 7.5%.
It's taken me 18 months of manual bidding to get it this far. I no longer carry out extensive duedil, but only lend to borrowers whose current assets exceed or are not too different in order of magnitude to their current liabilities. I also like solid answers to tough questions and a revenue stream that supports a larger loan, as this can indicate a more well established company. Not a foolproof rule though.
Defaults still happen, but not as many as when using autobid. My Father is also a higher rate taxpayer, so to be honest, if it hadn't been for my determination to dig him out of the hole that I perceive autobid to have put him into, I don't think it would have been worth his while to continue.
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blender
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Post by blender on May 7, 2014 23:05:33 GMT
(Reply to BracknellBoy) Only 128 loans at present (max exposure 6.5%), but it has been higher. For tax reasons I have reduced my account by about 30% from Feb and another family account has been established where there is basic rate headroom safety. That has been funded by systematically getting out of C- which were the only loans worth buying in the second half of last year. The other account was built through the recent shortage of lender cash and the 1%, so the figures are much better there, but early days. From a risk viewpoint, the two accounts are one because the loans held are different, and overall the figures are better than those I gave.
In the early days I bought too much on the SM, but compensated for later with trading.
There has been a lot of work involved, but also much useful learning. I am fortunate to be able to do what I wish with my time. If you have no spare time or expertise and are a tax payer, then FC is not such a good prospect.
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