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Post by clandestino52 on Mar 18, 2017 10:58:00 GMT
I found a paper claiming:
On the other hand such pricing combined with a buyback guarantee from the originator makes such investment essentially a loan directly to the company, since the investor takes the risk not of the underlying but of the originator
In this perspective such a rate of return seems inadequate for such an investment.
You can find it here:
blackmoonfg.com/site/pdf/bm_retail_discount.pdf
Also this from the conclusion
Investment opportunities with a buyback option from loan originators facilitated on Mintos and Twino marketplaces are essentially balance sheet loans to these alternative lenders packaged in the form of peer-to-peer consumer lending. Given the size of companies and little information on the originators these investment opportunities don’t seem to provide investors with sufficient return to compensate for the risk being taken. Nevertheless unsophisticated investors take these risks given the long-lasting period of near-zero rates of return for their investments. Good article. Thank you for sharing
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Post by buttchopf23 on Mar 18, 2017 15:15:02 GMT
As long the issued bonds of the originators yield +/- the same as the buyback loans, I would not speak of an inadequate return for such investments.
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Post by rahafoorum on Mar 19, 2017 11:40:24 GMT
As long the issued bonds of the originators yield +/- the same as the buyback loans, I would not speak of an inadequate return for such investments. Last I checked the bonds yielded higher. That was some time ago though and not every originator has issued bonds.
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Post by buttchopf23 on Mar 19, 2017 12:05:30 GMT
Sure, my post was just a general statement. Last time I checked viasms group the bonds and the buyback loans yielded similarly. If investing in the BB loans I would expect some little less yield, due to the circumstances.
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fric
Member of DD Central
Posts: 199
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Post by fric on Mar 19, 2017 12:55:31 GMT
The main issue with Buybacks and personal loans stay the same no matter what - everything is ok as the wheel keeps spinning and music keeps playing. If its 2008-2009 again, than the music stop and those personal loans will default close to 100% (lets be honest here, most of those unsecured personal loans are to people who can barely manage their finances right now, if they loose their job, they have barely anything left to survive) which will mean the company won't be able to provide buybacks.
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Post by buttchopf23 on Mar 19, 2017 13:12:42 GMT
True, next crisis will reveal the lo's strenght.
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p2pmaster
investment is life.
Posts: 128
Likes: 54
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Post by p2pmaster on Mar 19, 2017 15:37:27 GMT
Usually, bonds duration is much longer (3-5 years) than individual personal loans with BB (30 days to 24 months). Hence, we can exit BB loans faster than bondholders and for that possibility I am okay with lower yield.
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Post by buttchopf23 on Mar 19, 2017 16:11:18 GMT
Given there is liquidity, the bondholder can sell much faster. I get your point though and it is valid.
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