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Post by Deleted on Apr 19, 2017 17:10:50 GMT
"To the poster that says "massive" fee to sell: is 0.25% a massive fee? Judging by the sheer volume of sales going through the SM, most investors don't think it is a large fee to pay for the benefits it brings."
It depends if you are comparing FC with a building society account at doodly squat interest rate or a fund bringing an annual 20% interest rate. To me FC is half empty to others it is half full.
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sl125
Member of DD Central
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Post by sl125 on Apr 19, 2017 18:12:45 GMT
Not wishing to be impolite, Bobo, but I don't think your expectation of fees aligns with the reality of how fees are applied to any investment, not just FC.
0.25% represents about 1-2 weeks of lost interest. In other words, to reap the benefit of breaking a 5 year investment contract early, I forego just 1-2 weeks interest. Compare this to breaking any other 5 year investment early... typically several months interest has to be given up. Looked at another way: I've just checked the early redemption fees for my 5 year fixed rate mortgage: 5% of the redeemed amount must be paid...
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Post by wiseclerk on Apr 19, 2017 18:28:58 GMT
Commenting on the fee for the secondary market:
Many p2p lending marketplaces charge a 1% fee on principal for selling, so 0.25% seems very modest to me. But I have no hands-on experience with FC.
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Post by carpecyprinidae on Apr 19, 2017 19:26:38 GMT
In any case, at certain times of the week (sunday afternoon), loan parts are in enough demand that you can shift decent quantities at a markup that either covers the selling fee, or even leaves a penny or two in profit. The fee system always seemed fair to me, if I enter into contract I expect there to be some sort of cost if I would later cancel it.
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Post by GSV3MIaC on Apr 19, 2017 20:10:40 GMT
The 0.25% is really just FC's tax on 'flippers', who account for the largest slice of sales, last time I looked, and it is pretty modest compared to LC, or ReBS.
(but yes, lots of other platforms have 0% .. though many of those don't allow flippers to sell at a profit).
The 1% management fee is much more of a drag, especially when applied to a 6 month A+ loan (not so much on a 5 year E) .. really ought be some %age of what the lender gets (which just might incentivise FC to stop given lender money away at rock bottom rates. No, Ok, I dreamed that one).
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Post by Iain - Orca on Apr 21, 2017 11:38:54 GMT
Thanks for the your comments. I've tried to make the review as factual as possible. We analysed the financials of Funding Circle which can be reviewed on our dashboard (https://platform.orcamoney.com/sign-up). There is also a larger 20 page report which can be downloaded from platform. FC won't be in profit until they stop investing so heavily in global operations. In the period ending 31st of Dec 2015, the group reported a loss of (-£36m) with revenues of (-£32m). At the time they had a large cash position of £86m on net assets of £133m. This large cash position is due to significant equity investment ($373m) from VC and institutional investors. With such a cash position and a continued strong growth in the UK business, the financial security of FC is not a key concern of ours.
IFISA Update
It's disappointing that the big three haven't gained appropriate FCA permissions to offer the IFISA. Only the FCA and the respective platforms know why it's taken so long. For a while the general thought was that there was a backlog, but now, I'm thinking there might be a further reason. It's clear that FC, RS and Zopa are far more complicated than the smaller platforms so possibly something has spoked the FCA. It's unclear what the hold up is. Hi, Orca,
It's not factual and is friendly in the most significant figure - the return offered by Autobid after fees and losses. You state: Auto-bid Manual
Advertised Rates (annual) 7.10% 4.4%- 9.2%
The first point is that nowhere do FC state what the return from Autobid is, was or will be. I assume that figure of 7.1% is taken from the front page, and that is the projected performance of the past 3000 most recent loans, irrespective of whether they are purchased by institutions, manual bidders or Autobid. It is not an advertised rate. The definition as follows:
"It is calculated by taking the gross interest rate less fees and estimated bad debts that will occur in the future for each of the last 3000 loans accepted on the marketplace. The average return is weighted by loan amount, compounded and before tax" Note compounded - you have to keep fully reinvested - cash in available funds is not counted.
The range you have for manual is presumably taken from the statistics page, which is the past performance only, of both manual and autobid lenders by diversity. Yes autobid lenders are guaranteed diversity and are likely to fall in that range, but the range is what applies to Autobid lenders, not a single figure.
The last question is whether Autobid will get the average performance - a distribution around the 7.1% projected for those 3000 loans. Many think that Autobid gets mostly A+ and A loans, the D and E loans being snapped up before Autobid gets going. Also that 7.1% is weighted by loan value and contains a large number of individual property loans which at 8% minimum give the better rates and boost the A+ band performance. But Autobidders are allowed only one bite of one tranche of each property project, the rest going to manual bidders (me for example) who get the better returns at worse diversity. The removal of property is going to reduce that 7.1% closer to what Autobidders experience. Lastly, manual bidders routinely dispose of what they consider risky loans, which Autobid will pick up. Basic Autobid works with Autosale to provide liquidity on the platform, and consequently basic Autobid will catch any old loan part at par, down to 4% in the old days.
There is a good case to be made that Autobidders do not get the average distribution, but the main point is that FC give no separate figures for Autobid and manual lending, partly because the lenders are not defined as such, and both types experience a distribution.
On the FCA/ISIFA - of course we do not know why it takes so long, but the fact of it is significant.
Yes, agree that the rate displayed on the FC homepage is not the actual returns an investor would receive. I've updated the blog, stating how Funding Circle calculate this rate. Appreciate that Autobid investors are perhaps at a disadvantage but there is no way of segregating the loans invested in through the Autobid to calculate the actual returns. I would be interested to speak to anyone that has invested in Autobid for a long period of time (4+ years). We would need to evaluate the performance of 2012 loans to assess the actual returns as loans are still open from this year forward and therefore still at risk of default. I'm curious about how Funding Circle allocate loans to the Autobid as it seems like these investors are last in the pecking order. When an institutional investor rejects a whole loan how is this recycled? Do retail investors get notified if a part loan was previously offered to institutional investors as a whole loan for example? Is there a way of identifying these loans? -
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stub8535
Member of DD Central
personal opinions only. Not qualified to advise on investment products.
Posts: 1,447
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Post by stub8535 on Apr 21, 2017 12:24:51 GMT
Iain - Orca autobid is a surefire way to pick up the crud that seasoned investors sell at par. Ok if that is your thing! Secondary market leads to unfair users flipping at massive markups whilst locking the majority out of the higher rate loans. If you wish to do due dilligence before investing in high rate loans it is next to impossible due to the speed they are snaped up by gamers or institutional money. I left the platform after they asked a question that was carefully scripted and then used a stupid interpretation of the poll to impose unwanted actions without recourse. Only got defaults running now that are in the recovery process. Hope they do not expect their 1% fees to be paid any time soon. S
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Post by takeshi on Apr 21, 2017 12:34:56 GMT
"In 2014, Funding Circle extended its lending to residential and commercial property developments, however in April 2016, it was announced that lending to property related borrowers would stop, "
typo?
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Post by longjohn on Apr 21, 2017 13:00:10 GMT
<snip> I'm curious about how Funding Circle allocate loans to the Autobid as it seems like these investors are last in the pecking order. When an institutional investor rejects a whole loan how is this recycled? Do retail investors get notified if a part loan was previously offered to institutional investors as a whole loan for example? Is there a way of identifying these loans? Loans in the list are not identified as 'Retail' or 'Rejected Whole Loan' however it is possible to identify a RWL by its loan number. All loans are issued in sequence so if a loan had a lower number than the loans above it you can assume its been in the WL queue for a time (24hrs I think) and not been picked up. One way to be sure is to look at the Loanbook. If a loan is marked 'WL' and has more than one part it must be a RWL. You can only do this after the loan has been taken up and is live though. It takes a fair amount of time for autobid to cycle through the lenders checking their current allocation and whether to place a bid on a loan. This gives plenty of time for manual bidders to get in first and robots to beat everyone. This is why E's last seconds, D's last minutes, C's last an hour or so and B's a day or two. This leaves the unattractive (but supposedly safer) A's and A+ loans for the autobid. J
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Post by Iain - Orca on Apr 21, 2017 13:07:58 GMT
"In 2014, Funding Circle extended its lending to residential and commercial property developments, however in April 2016, it was announced that lending to property related borrowers would stop, " typo? Typo, thanks I have now updated. Iain
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Post by Iain - Orca on Apr 21, 2017 13:13:28 GMT
<snip> I'm curious about how Funding Circle allocate loans to the Autobid as it seems like these investors are last in the pecking order. When an institutional investor rejects a whole loan how is this recycled? Do retail investors get notified if a part loan was previously offered to institutional investors as a whole loan for example? Is there a way of identifying these loans? Loans in the list are not identified as 'Retail' or 'Rejected Whole Loan' however it is possible to identify a RWL by its loan number. All loans are issued in sequence so if a loan had a lower number than the loans above it you can assume its been in the WL queue for a time (24hrs I think) and not been picked up. One way to be sure is to look at the Loanbook. If a loan is marked 'WL' and has more than one part it must be a RWL. You can only do this after the loan has been taken up and is live though. It takes a fair amount of time for autobid to cycle through the lenders checking their current allocation and whether to place a bid on a loan. This gives plenty of time for manual bidders to get in first and robots to beat everyone. This is why E's last seconds, D's last minutes, C's last an hour or so and B's a day or two. This leaves the unattractive (but supposedly safer) A's and A+ loans for the autobid. J Very interesting. After analysing the loan book we've noticed that WL generally perform better than PL. Once we've completed our analysis on this I'll post a link to the results. Thanks for your comments.
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Post by Iain - Orca on Apr 21, 2017 13:18:22 GMT
... It would be good to receive any comments, suggestions or feedback on the review. Hi Iain In order to read the full review I am required to "Sign Up" which requies that I agree to your Terms of Service, Privacy Policy including Cookie Usetc. "By signing up, you agree to the Terms of Service and Privacy Policy, including Cookie Use ". Wanting to read what I was being asked to agree with, I find that the links just return the same sign up page.  Hi Slush, I've now linked the terms and conditions to the sign up page. They are fairly generic and I've linked for your convenience below. www.orcamoney.com/privacyWhat might be more interesting is the link below which shows how Orca plans to make money and why our service is currently free. www.orcamoney.com/blog/how-orca-gets-paidThanks, Iain
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blender
Member of DD Central
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Post by blender on Apr 21, 2017 14:37:30 GMT
Hi, Orca,
It's not factual and is friendly in the most significant figure - the return offered by Autobid after fees and losses. You state: Auto-bid Manual
Advertised Rates (annual) 7.10% 4.4%- 9.2%
The first point is that nowhere do FC state what the return from Autobid is, was or will be. ...
Yes, agree that the rate displayed on the FC homepage is not the actual returns an investor would receive. I've updated the blog, stating how Funding Circle calculate this rate. Appreciate that Autobid investors are perhaps at a disadvantage but there is no way of segregating the loans invested in through the Autobid to calculate the actual returns. I would be interested to speak to anyone that has invested in Autobid for a long period of time (4+ years). We would need to evaluate the performance of 2012 loans to assess the actual returns as loans are still open from this year forward and therefore still at risk of default. I'm curious about how Funding Circle allocate loans to the Autobid as it seems like these investors are last in the pecking order.
When an institutional investor rejects a whole loan how is this recycled? Do retail investors get notified if a part loan was previously offered to institutional investors as a whole loan for example? Is there a way of identifying these loans? I see the misunderstanding. FC do not allocate loans to Autobid. The same loans are accessible by Autobid and Manual bidders, the ones on the partial (or now called fractional) board. However some traders run fast bots which pick up the E loans before Autobid gets a look in. So Autobidders and manual bidders have the same population of loans. And Autobid us a tool which any lender can use at any time - so there are no distinct classifications of Autobidders and manual bidders. That is why FC does not give separate predictions or performance figure for Autobid or manual bidders. Whole loans are a separate population of loans and lenders, but the loans are randomly selected by an allocation process - and that seems to be true (apart from property loans).FC's Trust does not reject loans offered to it - in the rules - but other institutional whole loan lenders can and do, or did. An analysis somewhere on this board showed that their assessment and rejection did result in better performance (post fact the information is in the loan book). The rejected whole loans are placed on the partial board without any label and treated the same as the rest. I do not know if there are many rejects occurring at present.
PS Well I tried to download the loanbook but it did not work. However, the last one I downloaded was 24th Jan, and of the last 1000 loans accepted 736 were offered as whole loans and none were rejected. So this rejection thing may no longer be an issue.
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Post by GSV3MIaC on Apr 21, 2017 15:37:52 GMT
I ran a complete analysis some time ago .. WL's did better than PLs, and rejected WL candidates which went to PL did worst of all (so the WL buyers do have SOME luck at skimming the cream, but they are hardly foolproof). They do benefit from definitely getting a look in on Es and Ds, which autobid users will very rarely do (except very large loans, or 'pre owned' SM parts). There was a theory (i.e. FC said so) that rejected PL loans would be offered as WLs, but under the new autobidding system (where it can take 100% - originally it was capped at 50%, so the other 50% had to come from real live mugs) the chances of a PL not being funded are about zero (except a few very large property loans) and AFAIK no rejected PL ever went to WL (where it's probably be rejected again anyway!).
This "asymmetry" may be one of the reasons why the man from del Monte the FCA did not say 'yes' yet.
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blender
Member of DD Central
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Post by blender on Apr 21, 2017 16:34:25 GMT
I ran a complete analysis some time ago .. WL's did better than PLs, and rejected WL candidates which went to PL did worst of all (so the WL buyers do have SOME luck at skimming the cream, but they are hardly foolproof). They do benefit from definitely getting a look in on Es and Ds, which autobid users will very rarely do (except very large loans, or 'pre owned' SM parts). There was a theory (i.e. FC said so) that rejected PL loans would be offered as WLs, but under the new autobidding system (where it can take 100% - originally it was capped at 50%, so the other 50% had to come from real live mugs) the chances of a PL not being funded are about zero (except a few very large property loans) and AFAIK no rejected PL ever went to WL (where it's probably be rejected again anyway!). This "asymmetry" may be one of the reasons why the man from del Monte the FCA did not say 'yes' yet. And property loans, where the FC Trust did buy them up to a limit until approx. six months ago when they stopped, we believe due to the different nature of the risk profile. So property is going to autobidders/manual bidders until FC complete withdraw from property. So there is not one homogeneous loanbook for both whole and partial, and no analysis of difference. (No FC loans are rejected, they all get filled if they come to the partial board).
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