Updated T&Cs: effective 31 May 2017

After initial 3 month ramp up (from total of 4 deposits with deployment times of between an initial 42days and subsequent 14-21 days), then nearly 2 months later, XIRR is 6.2% and still slowly rising. I suspect there is a powerful randomisation algorithm working on the deposits, so that some are less than the "typical 28 days" and some are longer. This would explain the remarks ( more frequently complaints !) that others have made about this initial drag problem and the observed variability. Of course if there is a real drought of new loans available then these times extend considerably and even start to affect loan replacements within a previously fully allocated account, as they did for some time last autumn, but which I avoided by following the forum here and waiting until the drought was coming to an end.

Note ... Thinking further around this drought ( after composing my initial post here) it is quite possible that it considerably increased the risk profile of clients enduring it, because their baseline growth was stunted ( not fully allocated for several months) and furthermore any loans allocated then may have been at a higher deployment level than they would otherwise have been. So for example a 2% allocation ( needed to recover from the drought) may well have been rounded up to 3% which is very damaging if it picks up a loan which then defaults. Had this drought not occurred then the overall performance would be considerably enhanced, as the time to reduce down to 1% allocation would have been much quicker. In addition of course the baseline growth rate would have been faster too. I will write more about this later as I think it is very important to understand in the context of some clients who have suffered more than others. In this prolonged drought case the distribution of performance is likely to be far wider than normal ( when there is no drought and readily available loans )... back to original post ..

If I can diverge a little here and expand my new ( just dawned on me whilst writing here ! )thoughts around the latest controversial issues within this BM discussion board ... which have caused rather irrational posts here and thereby made future communications with the platform operator very difficult at the moment ... perhaps a new thread around this would be of interest to others ... subject ... randomisation ..

Randomisation of all the variables seems to be at the very heart of the way this complex product works and so this is probably why the experience of individuals varies so much initially, but I suspect that over a long time they are expected end up in a similar situation. The question of course is how long this is expected to take and I suspect it may extend into several years (especially if subjected to an abnormal loan drought for any extended time). In any case it needs to be seen as a long term investment, where withdrawals at an early stage may be penalised (within this particular product by the higher risk of defaults inducing a capital loss). In this way it might be seen as comparable to a conventional fixed term interest deposit with strict penalties for early withdrawals. For example some conventional fixed term interest products impose a penalty of an interest loss of 270 days ( or even more ). In this case note that the strict penalty also eats into the initial capital too thereby resulting in an overall loss, which can be considerable for a high interest account. Perhaps this analogy should form part of the marketing strategy here too, so that potential clients are better prepared for what might be expected from this complex product, should they attempt to withdraw from it before the "maturity date" and so whether it is suited to their particular needs ? ( In addition to the recent realisation that it is not suitable for deposits below 5k ). Of course due to the randomisation from the very start of an investment, some clients may suffer far more than others ( especially those subjected to loan drought or where they frequently add further large deposits) should they wish to withdraw in the early term ( possibly within a year of more ) as is being seen by recent posts here.

Apologies for the diversion, but I felt compelled to write that down whilst it was still fresh in my mind. To resume on the results of my own personal experience so far ..

No funds added or removed since the ramp up and the deployment rate has remained very close to 100% as new loans have cycled through. The allocation rate was automatically reduced from 2% to 1% shortly after my ramp up ended. I still have a few loan parts around 2% but these are slowly being replaced by parts at 1% or less ( for the higher risk ID loans ). So my risk profile is slowly impoving with time, which is exactly how this product is expected to work in time. If the allocation choice of 0.5% becomes available then the risk profile improves even further of course. I think I would certainly choose this in the light of current events reported here.

I have also processed my day to day annualised return and this is very close to 1% below the headline given at the top of the dashboard. For my account this has given a recent day to day return of 7.5 to 7.6% pa. So even with the revised charge of 1.5 % I would expect my daily return to be very close to 7% and in time the XIRR would eventually reach this level too.

I will see if I can present this data here in a graphical format later. So possibly the current view of the effects of the new fees is being undersold by the platform operator, whereby they are shooting themselves in the foot and even (further) hindering their own marketing strategy !

My own personal headline rate is also slightly below the platform blended loan rate given at the bottom of their home page (currently around 8.8%). If this figure were used then the post 1.5% fee target rate of 7% is even more realistic. It all depends how successful BM are in attracting low risk higher rate loans within the total platform blend.

But this has to be balanced against possible losses and I have recently had two loans placed on my watchlist. One is a bridging loan (0.8% capital loss potential) where interest is still being paid and stated as needing a few months to resolve before repayment, so I perceive this as an even lower potential loss than 0.8%. The other loan at risk is an overdue ID (0.8% potential loss), which has not yet been classified as a formal default. So everything depends on how any future crystallised losses might impinge on my slowly accumulating percentage gains as time goes by.

I would only truly realise these potential losses if I tried to liquidate right now, where these two possible losses would then certainly cancel out most of my gains so far, but as I am over the 5k limit I have no pressing need to do this.

It would be interesting to know how my situation compares with others here. I suspect it is very close to the "typical" situation but it would be useful to try and determine this by discussion with other people here. Also to get their views on my randomisation ramble and comparison with a conventional long term bond with strict penalties for early withdrawal. If this analogy holds then perhaps those complaining about their capital losses at the moment should reconsider their views. It is not as if they are at risk of losing their entire capital, as they are already protected by the strong diversity that the structure of the BM product provides by its inherent design. This is definitely not a product where the advertised target rate is expected to be easily achieved, especially within the first year.