ashtondav
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Post by ashtondav on Aug 19, 2017 16:16:05 GMT
Is it currently quick or slow - a day or two or a week or two? Also I am a little concerned about diversification. My understanding is if I invest, say, £5,000 and there are 100 loans I will be diversified at 1%. However if there are only 5 loans I would only have diversification at the 20% level. If this is the case is it better to drip feed my investment in, say, parcels of £500? Or doesn't it matter because the loan is covered by an asset and a provision fund, therefore diversification is not needed?
i am new to AC, wanting to diversify from RS and Z personal loans to secured and unsecured corporate loans. To this end I am also trying FC.
i also have a question about the provision fund. When does it pay out? Is it after a certain number of missed payments (Zopa)? Or is it after the sale of the asset to recover any shortfall (capital plus interest?)
thanks AC experts!
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david42
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Post by david42 on Aug 19, 2017 20:44:35 GMT
Some partial answers from my limited understanding. - I set a target for the GBBA on 8th August and so far 12% of the target has been allocated. Most of that has gone into just two loans. So extrapolating suggests around three months to get fully invested if the speed does not change.
- I have no idea whether drip feeding improves diversification. I would also be interested to know.
- From reading these pages, I get the impression that the provision fund has yet to be used and Assetz has not stated when they would use it.
- Yes loan diversification does matter because once a loan fails to repay you cannot get that money back out for an indefinite period until Assetz decides to use the provision fund.
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Mike
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Post by Mike on Aug 19, 2017 23:01:23 GMT
Drip feeding depends on the state of play when you add funds. Diversification levels are set to be no worse than x% (I believe x=20, the number is easy to find if you care but it's a semantic in order to answer the question at hand) in one loan.
But that becomes more complex as your investment level changes - eg if your max holding in a single loan is £20 today and tomorrow for GBBA total balance goes down to £50 does that holding reduce? No. Conversely if there are units available in that loan and you increase your GBBA total balance your holding in that loan will increase to the maximum x% if possible.
In other words, assuming the availability of loans on the market is static (it's not) then drip feeding doesn't help.
But... Loan availability changes are often slow. So you might need to wait a long time before the loans with available investment change and at that point topping up GBBA would result in only new investments (since the old loans are no longer available). But that's not really what you mean (I am guessing) so the short answer is that drip feeding probably doesn't do what you're hoping.
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ashtondav
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Post by ashtondav on Aug 20, 2017 6:45:54 GMT
Ok, thanks. In that case the provision fund deployment rules are important to me. Has AC really never experienced a default - or is there no definition of a default (for PF purposes) yet?
Thanks for the insights.
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SteveT
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Post by SteveT on Aug 20, 2017 6:57:13 GMT
Ok, thanks. In that case the provision fund deployment rules are important to me. Has AC really never experienced a default - or is there no definition of a default (for PF purposes) yet? Thanks for the insights. AC has plenty of defaulted loans, some several years old, but none where a definitive loss / write-off has yet been declared (although prospects for further recovery on a couple seem vanishingly thin, IMHO). Only then would the PF kick in, I understand.
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ashtondav
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Post by ashtondav on Aug 20, 2017 7:21:31 GMT
I guess that's why the provision fund is so high if it doesn't pay out on a loan that's years in arrears. That really does mean I need to diversify. I do find it strange that AC does not define default for PF purposes.
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Post by Ton ⓉⓞⓃ on Aug 20, 2017 7:21:51 GMT
So far there have been no defaults that AC has not had a full recovery on, but even AC admit that there are some in the process now that are almost bound to have a loss. The PSIA is new so will not have most of them AFAIA, I haven't picked any up.
PF payout is unlikely in the few months after a default, my understanding is that all avenues need to be explored in getting recovery from the Borrower (selling security, IVA, bankrupcy for eg) only then can the loss be fully quantifed most cases take many months and the hard ones stretch into years. Also the decision to payout is said to be "discretionary" but my understanding is that it has to be discretionary as if it were not then it would, in effect, be insurance which strays into another area of regulation, but in reality they would probably always pay out as long as there were funds in the PF. This I think is the next area I need to sort out for my own piece of mind.
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Mike
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Post by Mike on Aug 20, 2017 17:48:53 GMT
My understanding is as above, which is why I am so curious to hear PF decisions have been readily made in the fast access accounts...
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rogerbu
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Post by rogerbu on Aug 20, 2017 20:52:39 GMT
Is it currently quick or slow - a day or two or a week or two? Also I am a little concerned about diversification. My understanding is if I invest, say, £5,000 and there are 100 loans I will be diversified at 1%. However if there are only 5 loans I would only have diversification at the 20% level. If this is the case is it better to drip feed my investment in, say, parcels of £500? Or doesn't it matter because the loan is covered by an asset and a provision fund, therefore diversification is not needed? i am new to AC, wanting to diversify from RS and Z personal loans to secured and unsecured corporate loans. To this end I am also trying FC. i also have a question about the provision fund. When does it pay out? Is it after a certain number of missed payments (Zopa)? Or is it after the sale of the asset to recover any shortfall (capital plus interest?) thanks AC experts! The bigger question is how long does it take to escape from the GBBA. Selling up I got back 85% quickly. The remaining 15% is stuck in junk loans that as AC doesn't ever seem to declare a loss, then the PF never comes into play.
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jlend
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Post by jlend on Aug 21, 2017 5:57:30 GMT
Is it currently quick or slow - a day or two or a week or two? Also I am a little concerned about diversification. My understanding is if I invest, say, £5,000 and there are 100 loans I will be diversified at 1%. However if there are only 5 loans I would only have diversification at the 20% level. If this is the case is it better to drip feed my investment in, say, parcels of £500? Or doesn't it matter because the loan is covered by an asset and a provision fund, therefore diversification is not needed? i am new to AC, wanting to diversify from RS and Z personal loans to secured and unsecured corporate loans. To this end I am also trying FC. i also have a question about the provision fund. When does it pay out? Is it after a certain number of missed payments (Zopa)? Or is it after the sale of the asset to recover any shortfall (capital plus interest?) thanks AC experts! The bigger question is how long does it take to escape from the GBBA. Selling up I got back 85% quickly. The remaining 15% is stuck in junk loans that as AC doesn't ever seem to declare a loss, then the PF never comes into play. Do you get 7 percent interest on the remaining loans?
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SteveT
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Post by SteveT on Aug 21, 2017 7:21:05 GMT
The bigger question is how long does it take to escape from the GBBA. Selling up I got back 85% quickly. The remaining 15% is stuck in junk loans that as AC doesn't ever seem to declare a loss, then the PF never comes into play. Do you get 7 percent interest on the remaining loans? In principle, yes, eventually ...
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Post by ogwellian on Aug 21, 2017 7:43:15 GMT
Do you get 7 percent interest on the remaining loans? In principle, yes, eventually ... From the AC website:- The Provision Fund is designed to cover; Payment delays of interest from a borrower where that sum arrives later than expected Shortfalls in interest received from a borrower Any possible capital losses if a loan defaults and the security when sold does not cover the loan balance remaining These two snippets confuse me though:- The GBBA offers a target, capped interest rate for investors of 7.00% gross per annum (before tax and any loan losses). Annualised projected return after expected losses for the GBBA is currently 7.00% gross
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jlend
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Post by jlend on Aug 21, 2017 7:54:07 GMT
Do you get 7 percent interest on the remaining loans? In principle, yes, eventually ... Is there a way of seeing how much interest is accruing on these loans in my GBBA account?
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SteveT
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Post by SteveT on Aug 21, 2017 8:05:48 GMT
In principle, yes, eventually ... Is there a way of seeing how much interest is accruing on these loans in my GBBA account? Not that I know of, although the total accrued interest figure on your Dashboard will show you if you only have GBBA holdings. The "Your Loans" view shows accrued interest but only for MLIA holdings.
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jlend
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Post by jlend on Aug 21, 2017 8:26:11 GMT
Is there a way of seeing how much interest is accruing on these loans in my GBBA account? Not that I know of, although the total accrued interest figure on your Dashboard will show you if you only have GBBA holdings. The "Your Loans" view shows accrued interest but only for MLIA holdings. Thanks very helpful. I have just added that to my dashboard. Is this figure the accruing interest for late loans (for whatever reason) or does it also include interest on performing loans that just haven't been paid yet?
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