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Post by woodbury on Aug 21, 2017 11:03:08 GMT
FC has a huge amount of high value "A+/A" rated property finance loans on the books. Guessing here, but I am pretty sure that over the coming 12 months, some of these property loans will need refinancing.
This new system should make refinancing much easier for FC, enabling them to preserve their late payment ratios. But lender's wont have a choice.
As an FC investor who does not want to be further exposed to property loans, this new system means I will not be adding any more funds and will probably just cash out completely some time soon.
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c88dnf
Member of DD Central
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Post by c88dnf on Aug 21, 2017 11:10:10 GMT
As others have written, with the changes announced today FC will effectively become a Zopa clone with investors taking a punt on unknown risks for a hypothetical target return (*) with debatable ability to access your money if you need it quickly. I'm not in Zopa because their target returns are nowhere near what I consider reasonable for the risks involved.
FC may be different, but we have no way of knowing until the new scheme has run for a year or two. The key issue is whether FC can correctly evaluate risk and are competent about managing the portfolio, plus the loans' length. Diversification may or may not address the risk. I got shut of all my FC loans last month (apart from those which are "late" or defaulted) and certainly won't be re-investing until the new scheme is well evaluated by hardier souls on this forum.
EDIT - (*) Just noticed that the suggested return on the new "balanced" option is 7.5% per year after fees and bad debt. Yet FC's own graphs in the announcement show expected returns no higher than 7.2% for any originating year so far, with most rather lower than that. Can someone explain to me how FC hope to achieve the 7.5% figure?
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Post by bracknellboy on Aug 21, 2017 11:11:25 GMT
Yes, it is not going to affect your holdings in any way, until/unless you try to sell, or make new investments. Thank you for the clarification GSV
OK so my current investments will continue as planned but what about when the payments when there made? I don't want this Auto-bot to re-invest my funds before I have the opportunity to withdraw them.
Now that I have retrieved the email from my Spam folder, taken from it: We have made switching over as straightforward as possible. Just sign in to your account and select one of the options from the pop-up box. If you do not select an option by 18th September, you will not be able to lend to any more businesses until you turn the new lending tool on.Think that answers it ?
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ceejay
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Post by ceejay on Aug 21, 2017 11:27:20 GMT
I'm quite irritated, mainly because I've been having quite a lot of fun while evolving my "system", which I will now never find out if it was going to be any good! At least it will never be proved wrong, and I can tell myself I'm a genius because the contrary evidence will never have arrived...
So now I'm dumping loan parts which I had planned to sell over the next few months. The SM is quite busy, and I think the website is noticeably slower than usual (though not unusably so).
Having done that, it seems that there are a few bargains to be had which I will snap up while I can, but it looks like I will have quite a bit of my cash left without a home in FC, so it will have to go elsewhere, at least until we see how the "new" FC pans out.
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blender
Member of DD Central
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Post by blender on Aug 21, 2017 11:58:17 GMT
I guess if you don't turn autobid on, and/or don't agree to all the new T&Cs, then money will just pile up in your holding account waiting for you withdraw it. Well that's how it SHOULD work, but you might want to check with FC in case they know. This is right. Just do not choose either of the new Autos and you just receive the repayments - that's what it says.
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SteveT
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Post by SteveT on Aug 21, 2017 12:25:01 GMT
EDIT - (*) Just noticed that the suggested return on the new "balanced" option is 7.5% per year after fees and bad debt. Yet FC's own graphs in the announcement show expected returns no higher than 7.2% for any originating year so far, with most rather lower than that. Can someone explain to me how FC hope to achieve the 7.5% figure? If the overall loan book return remains around, say, 7%, but a significant number of lenders are expected to opt for the "Conservative" option targeting 4.8% (ie. less than 7%) then those opting for the "Balanced" option must be expected to average more than 7%
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Henrik
P2P Blogger
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Post by Henrik on Aug 21, 2017 12:35:36 GMT
A guy from Funding Circle actually called me this morning because of the blog that I'd started (which is in effect pointless now). My points to him were:
1. FC will lose the input of manual investors who use the platform on a daily basis and can provide analysis and observations. While this will reduce servicing needs (and costs) I think it will have a negative effect in the long term because there will be less pressure on FC to improve or change things. There's no way autobid investors can provide the same level of feedback. He said customer feedback is still very important to them.
2. If the lack of feedback and criticism leads to a declining investment performance they can't change this very quickly as there will be up to a 5 year tail on some of the loans. I think the feedback is important because people are constantly talking about whether something should be an A loan or not or how their individual default processes are going. He said that they will be monitoring the performance as much as possible
3. He said that they still offer market leading returns. I disagreed. If you can get 5-6% on Ratesetter or Growth Street with a provision fund, then I think that is better than an uncertain estimated 4.8% or 7.5%. Lendy will give 9-12% on property which is better than an unsecured loan.
4. He said the main reason for the change was that FC considered it unfair that people in autobid couldn't access D or E loans in the primary market or had to pay a premium for them in the secondary market. I have 130 D or E loans and apart from one or two all of them came from the secondary market. Paying a premium was never a problem because you could still get over 17 or 21% which is not bad if you like the loan. More often than not you could get the premium back (or more) if you sold them later on.
5. My last point was that FC won't be fun any more. Reading about businesses, building up my own portfolio and looking for 'market inefficiencies' was the whole reason that I enjoyed using the platform. The response was that they still want people to have a direct relationship to their borrowers so although you can't choose who you've lent to, you can still see who is getting your money. He also said retail investing is still very important to FC because they don't want to rely on corporate money only (in the event of a downturn).
I'm disappointed because I put a lot of effort into writing a book and building a blog. It hasn't been so active recently because I've been taking some time out to think about some of the changes I wanted to make. I did want to relaunch the book as well at some point but I guess there's no reason to now. Nothing I can do about it however and I've had a good run over the last year.
I think I'll hold on to my existing portfolio for a few months then withdraw. Without that fun factor I'm not so interested in FC. Seeing my new loans in companies with awful finances or business descriptions that read "Need working capital." or "Need a loan for cashflow (= running out of money)" would be more of a fear factor than a fun factor for me. In terms of returns, I don't think they are worth the uncertainty compared to what you can get on other platforms.
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archie
Posts: 1,866
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Post by archie on Aug 21, 2017 12:36:51 GMT
I wonder how sophisticated the algorithm might be? Wouldn't surprise me if those with above the expected average return get allocated low interest loans and vice-versa.
In the latter case, adding high interest loans to an underperforming portfolio might make it worse.
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kaya
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Post by kaya on Aug 21, 2017 12:41:43 GMT
Never mind folks, there is always Lending Crowd, heh heh. They must be licking their lips in anticipation  |
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Post by mrclondon on Aug 21, 2017 12:50:07 GMT
What will now be very interesting is what model Funding Knight adopt when they relaunch next year (under the Sanctus brand). This decision by FC may free them from any perceived need to retain individual loan selection. LC/ReBS don't seem to offer compelling evidence that lower loan volume plus individual loan selection is a winning formula.
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epic
Posts: 14
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Post by epic on Aug 21, 2017 13:05:06 GMT
Looks like a lot of people are reading the changes and not liking what they see...secondary market currently over 20 pages for sale at par.
Been pretty crazy all morning
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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 Aug 21, 2017 13:07:20 GMT
Goodbye botters and flippers ... No. They will just go elsewhere.
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Post by takeshi on Aug 21, 2017 13:29:01 GMT
They've clearly been planning this for a while - hence the meaningless loan tiles - 'Expansion and Growth' and the poor loan descriptions.
I'd say this completely removes the 'fun' element from FC - and FC is no longer P2P - it's a pseudo bank.
I'm out, 50% sold already (amusingly one of my sales has hit the incorrect balance problem - where a part is sold more than once. They won't need to fix this problem now as there'll be no 'contention' in sales of loan parts?).
It was fun while it lasted....
Edit: I guess another reason they've gone in this direction is it simplifies the IT challenges overall?
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IFISAcava
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Post by IFISAcava on Aug 21, 2017 13:47:53 GMT
Looks like a lot of people are reading the changes and not liking what they see...secondary market currently over 20 pages for sale at par. Been pretty crazy all morning Or maybe people are just taking advantage of the removal of the 0.25% selling fee?
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yangmills
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Post by yangmills on Aug 21, 2017 13:48:56 GMT
I'm skeptical that this change was driven by bots and flippers. As someone who operated a quant algo on FC (calling it a "bot" does underestimate the amount of thought that goes into building such a system) this approach was already in terminal decline. I (and most others I know) exited FC late last year when it became clear that it wasn't possible to really generate the level of returns (15-25%) that has been achievable in 2014-16 and that scalability was constrained.
This just seems another example of P2P showing convergent evolution to the mainstream finance industry. Some P2P platforms, like Zopa, seem to want to evolve into challenger banks. Others like LendInvest and FC are clearly heading toward the fund management type model. FC started their move with FCIF and this new announcement is really just an opaque spin on fund management. You have two "funds" called "conservative" and "balanced" and you can buy and sell units in them. You have zero control of what you buy and sell but by showing that you own specific units in certain loans, FC can keep saying this is P2P rather than a collective investment scheme. I suppose FC has to keep the pretence that they are "disruptive Fintech" because if they were valued as a bank or investment managers there is no way their current valuation > £1bn could possibly be supported.
I think for the majority of retail investors this is probably a positive. Frankly, FC never has provided the level of detail needed to allow investors to make an informed credit appraisal. It will be much simpler and "fairer" (whatever that really means). I might reinvest via this new model (since it will be "fire and forget") except that I can't really see how it offers much in the way of an advantage over FCIF.
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