Steerpike
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Post by Steerpike on Sept 7, 2017 20:07:57 GMT
Hi everyone. The main reason that the GBBA isn't investing quickly is that the mandate to purchase loans means that many of the currently originated loans do not pass the interest rate hurdle and therefore the GBBA cannot invest in them. We have two choices. 1. close the account and leave the PSIA open. 2. commence a new Series 2 of GBBA at a new lower rate of probably 6% or perhaps 6.5% for now. 3. open a new version of GBBA that has no provision fund and auto invests into many more loans as a result as the margin that funds the provision fund would not be required and therefore more loans would fit the new mandate. We would be interested in votes and we could run a voting system on this to get input into our decision ? We do apologise for the delay in investing in this account, and indeed the GEIA right now. This slow investment speed is not acceptable to us as well as yourselves. The GEIA will be fixed with greater origination that we are expecting as a result of new work we have done. The GBBA by way of a decision on the choices above. 2. The GBBA was designed as a fire and forget safer account, nothing much wrong with that, the market has been tightening and it has been obvious for some time that the current GBBA and GEIA rates would have to be lowered. Recognise the reducing rates overall, stick to the concept, reduce the rate to 6% on GBBA2, but please define exactly how and when the PF will operate. Rates are falling on many established platforms for example LendInvest has dropped from 7-8 to 5-5.5
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jlend
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Post by jlend on Sept 7, 2017 20:27:12 GMT
Hi everyone. The main reason that the GBBA isn't investing quickly is that the mandate to purchase loans means that many of the currently originated loans do not pass the interest rate hurdle and therefore the GBBA cannot invest in them. We have two choices. 1. close the account and leave the PSIA open. 2. commence a new Series 2 of GBBA at a new lower rate of probably 6% or perhaps 6.5% for now. 3. open a new version of GBBA that has no provision fund and auto invests into many more loans as a result as the margin that funds the provision fund would not be required and therefore more loans would fit the new mandate. We would be interested in votes and we could run a voting system on this to get input into our decision ? We do apologise for the delay in investing in this account, and indeed the GEIA right now. This slow investment speed is not acceptable to us as well as yourselves. The GEIA will be fixed with greater origination that we are expecting as a result of new work we have done. The GBBA by way of a decision on the choices above. A vote sounds like a good idea. It would give you a reasonable idea of the take up of any new account. There are clearly a number of different groups of lenders... some value provision funds and auto investments, others prefer manual loan selection with no PF cover. It's only a gut feel... I assume a lot of people who invest in the GBBA do it because it has a PF. Leaving the current GBBA and opening a new issue at 6.5% feels like it would get a reasonable take up of money. I can't see many people investing in a GBBA without a provision fund right now until there is some track record of the diversification algorithm working and across a large pool of loans. I personally would not invest in option 3.
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IFISAcava
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Post by IFISAcava on Sept 7, 2017 21:37:51 GMT
I suggest you consider switching to MLIA, there are currently circa 50 loans available. You could put a buy order of £10 on each one. I believe it takes about 2 hours to complete a cycle of trade matches......so I suggest you increase your buy orders after the 1st run to allow for any interest payments, as AC loans don't just pay at the EOM in MLIA. This will mean any loan interest/principal payments will automatically be reinvested in any loan you have a buy order with. Not only would your money probably be fully invested by the end of the day, you would be getting between 7&10% spread over 50 loans. I know there is no PF, but AC's record is pretty good as far as defauts are concerned and their recovery record is pretty good too. Also, your risk would be pretty low by being spread over 50 loans...........if you want to be more choosy/safer stick to the higher no. loans and go for ones with plenty of time left. If you are concerned about re-sale, avoid loans with high amounts of availabilty I personally only consider loans >11%, so any new money takes longer to invest...........so I 'park' in a low interest one, I then slowly re-invest as higher rate loans become available. Many thanks. As you can see I am very new to the AC world. got to be pretty difficult (aka nigh on impossible) to get any significant amount invested at 11% on AC nowadays.
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jonah
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Post by jonah on Sept 8, 2017 6:59:32 GMT
1. close the account and leave the PSIA open. 2. commence a new Series 2 of GBBA at a new lower rate of probably 6% or perhaps 6.5% for now. 3. open a new version of GBBA that has no provision fund and auto invests into many more loans as a result as the margin that funds the provision fund would not be required and therefore more loans would fit the new mandate. 2. The GBBA was designed as a fire and forget safer account, nothing much wrong with that, the market has been tightening and it has been obvious for some time that the current GBBA and GEIA rates would have to be lowered. Recognise the reducing rates overall, stick to the concept, reduce the rate to 6% on GBBA2, but please define exactly how and when the PF will operate. Rates are falling on many established platforms for example LendInvest has dropped from 7-8 to 5-5.5 Personally I've been expecting rate drops for GBBA for quite some time. A cynic might suggest that with the upcoming isa that this was the trigger, but I'll try to avoid that. Kudos to stuartassetzcapital for flagging this before people (me included) initiate transfers of previous years ISAs. Option 1 is basically saying there is no way to make the account work. People who like the mlia (which I use) and dislike the 'competition' for loans might like this. Other than them, I can't see anyone preferring this option. Option 3 is mlia but without the ability to pick or run away from loans. You don't specify if these loans would be at a fixed rate or their natural rate. If it's at a fixed say 7% then this would effectively mean that people got all of the risk of an mlia loan, but up to 5/12ths (based on an increasingly rare 12% loan) of the reward going and lose all control. If this was selected then I would be rethinking my isa plans completely (not for the first time). So, I'm in favour of option 2. At 6.5%, depending on the PF approach, which was why I quoted Steerpike he point is becoming increasingly important, given today's low interest rate climate, I would probably continue with plans as is.
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ashtondav
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Post by ashtondav on Sept 8, 2017 7:38:46 GMT
If the reality is lower rates, lower the rate to 6% or 6.5% and retain PF. This is consistent with Zopa and RS who are also inflicting lower rates.
i want a fire and forget black box that I can invest in quickly and get returns. Yes FC is higher but no PF.
meantme I'll reside in quick access.
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SteveT
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Post by SteveT on Sept 8, 2017 8:03:20 GMT
stuartassetzcapital, undoubtedly there is still sizeable demand for a managed, PF-protected account that auto-diversifies lenders across much / most of the AC loan book at a competitive rate for the risk. If the best rate you believe AC can sustain is now 6.5% then so be it, but I suggest you address the two obvious flaws of the current GBBA at the same time: 1) Feeding 20% of a lender's funds into any one loan and leaving it all there is crazy. The investment algorithm should start with a maximum of 10% (or even 5%) exposure to any one loan and regularly auto-diversify lower as further new loans go live, and 2) The PF should step in and compensate GBBA2 lenders at the point that a loan meets HMRC's definition of "Irrecoverable" (ie. enters legal recovery procedures), not at some undefined moment perhaps years down the line when AC finally declares a definitive loss (which, as yet, has never happened)
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Post by peerlessperil on Sept 8, 2017 8:18:47 GMT
The way I see it is what is your competition? I trust FC's estimate of 7.5% after fees and losses because they have a lot of experience and statistics. Compares very favourably against AC's best working account of 5.5%. Even BM offer 6.5% even though my experience was way below that. The question is, if AC created an auto account that invested equally in everything on the platform with no PF what would *it* return after fees and losses? I'm currently suggesting my friends and family to put cash equally in FC and AC but there is a bit of a hole in AC's auto offering currently. Hi paul123 (& also crossed with SteveT) I too have had detailed correspondence with AC over the workings of the GBBA and I expressed numerous concerns: - You can easily end up with over >20% in a single loan if you make a withdrawal from uninvested cash before allocation is complete, and your liquidity in selling back down is no better than the secondary market
- The GBBA makes no effort to reduce your concentration once invested (i.e. a 20% holding will stay at 20% without further investment)
- 5 loans minimum is not remotely diversified (as provision fund is discretionary)
- You can get stuffed with what is being avoided by MLIA investors in the secondary market (e.g. loans very close to maturity). I ended up with a 20%+ holding in a loan I'd steered clear of in the MLIA....
They have acknowledged these issues, but probably have a better opinion of their discretionary provision fund than I do. I would expect improvements on the next iteration, but for now the best option is to create your own properly diversified portfolio via the MLIA. I exited the GBBA completely.
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ashtondav
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Post by ashtondav on Sept 8, 2017 8:43:19 GMT
stuartassetzcapital , undoubtedly there is still sizeable demand for a managed, PF-protected account that auto-diversifies lenders across much / most of the AC loan book at a competitive rate for the risk. If the best rate you believe AC can sustain is now 6.5% then so be it, but I suggest you address the two obvious flaws of the current GBBA at the same time: 1) Feeding 20% of a lender's funds into any one loan and leaving it all there is crazy. The investment algorithm should start with a maximum of 10% (or even 5%) exposure to any one loan and regularly auto-diversify lower as further new loans go live, and 2) The PF should step in and compensate GBBA2 lenders at the point that a loan meets HMRC's definition of "Irrecoverable" (ie. enters legal recovery procedures), not at some undefined moment perhaps years down the line when AC finally declares a definitive loss (which, as yet, has never happened) Both points are eminently sensible. PF paying out after 2 or 3 years of lapsed payments in a loan which could be 20% of your investment is laughable at best and crass at worst. Until addressed, based on my experience GBBA is not tenable for the small inexperienced investor. Nothing wrong with that as there are plenty of business models. Arguably Zopa, FC and RS have all now gone for the mass market.
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Post by davee39 on Sept 8, 2017 8:57:35 GMT
The GBBA is the highest yielding part of my P2P portfolio.
I share the concerns regarding the provision fund. While I would not expect it to pay out at the first missed payment I would welcome clearer guidelines. I had been hoping to see something along the lines of ' the provision fund will consider payments no later than 24 months from the start of recovery proceedings'.
With greater confidence in the provision fund I would be happy to invest at 6%. I would not be interested in an unprotected automated account.
Currently fairly happy with the better protection from the quick access and 30 day options. The 3.75% paid on funds waiting to be invested means I am no hurry to pull uninvested funds out.
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Post by crabbyoldgit on Sept 8, 2017 9:39:43 GMT
Should the present gbba / geia close and i assume that means no new investment from interest and repayments of capital from within the accounts . A problem arises, in that, as the remaining loans reduce and no internal loan part transfers happens the diversification of accounts will rapidly deteriorate. When there are only 4 loans left 20% max will be impossible but that will occur much earler in my opinion. Will AC be introducing the long promised program changes to enable internal loan part trading, or pond the loan parts like in the quick access accounts. Something i believe will have to be done as a default at the last gasps of the account could leave an invester with a very high percentage loss rate in their remaining funds making a lie of the prospectus promised statements around diversification.Of course the pf could beso large at this stage as to underwrite all possible losses.
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ashtondav
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Post by ashtondav on Sept 8, 2017 9:42:30 GMT
Agreed. Quick access the best option until GBBA becomes a true fire and forget account like RS, and FC and Zopa ( latter two without PF of course.) If there are no sensible rules for the PF to pay out (keeping it "not guaranteed", of course) then diversification at the 1% level is essential.
There is a truckload of difference between "not guaranteed" PF and "discretionary" PF. The former has rules, but the fund may not be sufficient to pay all bad debt. The latter is simply, er, discretionary and not particularly useful.
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Mike
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Post by Mike on Sept 8, 2017 10:05:52 GMT
Has the interest rate requirements changed stuartassetzcapital ? Or some other requirement? I can only put what I see down to this being the case |
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Post by Butch Cassidy on Sept 8, 2017 10:09:38 GMT
Hi everyone. The main reason that the GBBA isn't investing quickly is that the mandate to purchase loans means that many of the currently originated loans do not pass the interest rate hurdle and therefore the GBBA cannot invest in them. We have two choices. 1. close the account and leave the PSIA open. 2. commence a new Series 2 of GBBA at a new lower rate of probably 6% or perhaps 6.5% for now. 3. open a new version of GBBA that has no provision fund and auto invests into many more loans as a result as the margin that funds the provision fund would not be required and therefore more loans would fit the new mandate. We would be interested in votes and we could run a voting system on this to get input into our decision ? We do apologise for the delay in investing in this account, and indeed the GEIA right now. This slow investment speed is not acceptable to us as well as yourselves. The GEIA will be fixed with greater origination that we are expecting as a result of new work we have done. The GBBA by way of a decision on the choices above. A better alternative would be to originate more loans with a lender rate of 8%+ so both GBBA & MLIA lenders could be serviced; cease taking 100% of every loan directly into QAA & then only slowly releasing a small % of them to the other accounts, higher rate loans should be distributed directly to GBBA/MLIA accounts. Whilst it is great for AC to pay this large pool of QAA savers just 3.75% to provide cheap underwriting funds it is rather pointless if the loans that are being provided are unwanted (at the rates currently being offered) by genuine lenders. If AC aren't providing enough loans where the risk/reward balance is seen as attractive enough by investors then the answer is hardly reduce the reward/rates further, even though the capacity to underwrite them currently seems limitless. Convincing inexperienced users that low rates = low risk is a very unwise strategy IMO.
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dandy
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Post by dandy on Sept 8, 2017 12:31:26 GMT
according to AC website the PF for the combined qaa/30daa is about £1m - but a lot of this is already ringfenced for known losses. So 3.75% is basically pricing to liquidity not risk (and as for liquidity even that has now been heavily restricted)
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Mike
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Post by Mike on Sept 8, 2017 12:51:44 GMT
according to AC website the PF for the combined qaa/30daa is about £1m - but a lot of this is already ringfenced for known losses. So 3.75% is basically pricing to liquidity not risk (and as for liquidity even that has now been heavily restricted) source? I see where this is from. Not sure how you know whether the stress test figures do or do not include ringfenced sums? Liquidity for me is not restricted in any way on the instant account, what makes you say that? £1M might sound low but a significant amount of the QAA/30DA is not in loans, just sitting as cash.
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