fogey
Posts: 171
Likes: 104
|
Post by fogey on Apr 22, 2017 17:07:57 GMT
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.
|
|
fogey
Posts: 171
Likes: 104
|
Post by fogey on Apr 18, 2017 2:32:09 GMT
I find it sad that I'm writing this post - It was transparently obvious that such a low entry level/fee never made any real long term business sense for such a complex product but rather that it offered a promotional opportunity for people to sample this product for a very small outlay. The only surprise is that this opportunity lasted as long as it did. From the recently released figures of 500+ total client base it seems that perhaps around a half of these accounts were either running at a loss or making very little profit at all. If I was running such a business in this state I would not be at all sad to lose such a millstone from around my neck, on the contrary I would be elated. Perhaps the perplexed perspectives from outside the Perspex Box should try harder to understand the perspective from within it. The real problem with the transparency issue here is to understand the machinations that are going on within the box and how they should be used for the mutual advantage of the platform operator and the clients. If everything was so transparently obvious and easy to understand there would be no need for all these questions here and the difficulties in understanding the answers.
So yes you have to be here to explain your business case and how it all works as no one else is suitably qualified. It just makes sense to take a low profile at the moment until the Aunt Sally bashing craze dies down and sensible discussions can resume again.
|
|
fogey
Posts: 171
Likes: 104
|
Post by fogey on Mar 7, 2017 17:56:52 GMT
The new format for the detailed loan listing makes it a little easier to see what is going on as you don't have to trawl though the list to see if there are any dreaded red default flags buried within it. They are now there as a selectable tab at the top of the long list, together with crystallised loss information. I hope this is not a sign of impending new data for everyone.
Also some of the interest rates are now given to four decimal places ! This is most unusual for BM as virtually everything else is always rounded out in one or more ways. But how likely is it that two or more part loans have the same four decimal place interest rate ? Are these really from different loans (as needed to dilute the total investment risk )? It's essential to know this of course, otherwise you will be hit really hard if that loan goes down the tube.
|
|
fogey
Posts: 171
Likes: 104
|
Post by fogey on Mar 7, 2017 16:03:13 GMT
The last chart here is what most people would really love to see as the actual cash returns are very fast indeed. Instead of waiting the best part of a year to get 7% returns here they are already very close to 7% within one month. So this then really transforms the product from a long term to a short term one. Need to be careful as to how these 'mock ups' are interpreted. There will need to be some significant changes to them - not least the way the axes are labelled. I think the words 'projected annual' or something like it would need to be added liberally Yes indeed, although these charts provide a very good insight as to how the product is expected to perform (and thereby improve the marketing potential !), the downside is that any lack of actual realisation of such performance will very soon lead to many more questions. But at the moment there is really no yardstick to see how well your investment is progressing over time. The inclusion of a personalised chart in all the personal summary dashboards would be far more meaningful than the information currently supplied, where the headline rate emblazoned at the top is rather meaningless to most people, especially when it appears to be offering more than they are currently really seeing from their actual cash returns. In general most people are not really interested in the reams of data provided in the allocation list or even their allocation rate. All that matters is how quickly their accumulated daily returns grow and they really want to see that on the summary page, rather than having to calculate it themselves.
|
|
fogey
Posts: 171
Likes: 104
|
Post by fogey on Mar 7, 2017 15:23:49 GMT
PS: and if we could get everyone fully deployed in 7 days....how good would this be.... ![](http://i.imgur.com/nZ8ZHId.png) I think these charts are very useful, as they are trying to show how the product is expected to work and how (for the first two charts) it works best on a very long timescale of one year. The earlier two charts tend to show the time to reach an end goal of 7% is not very dependent on the initial deployment rate, but rather obscure the fact that your actual cash returns will be much less with the slower deployment rate, especially in the first few weeks. The last chart here is what most people would really love to see as the actual cash returns are very fast indeed. Instead of waiting the best part of a year to get 7% returns here they are already very close to 7% within one month. So this then really transforms the product from a long term to a short term one. I can perhaps see why it is difficult to quickly deploy a very large investment, even if the loans are there to fund it, but if it is just a few thousand pounds it seems to me that it should not be too difficult to do this now. Indeed a few lucky people have already achieved this and I am thinking this may be entirely due to the special accelerated deployment algorithm which was developed last year, but which is only used when the overall platform loan funding is close to 100%. I remember people enjoying full allocation within 7 days earlier last year but then finding great disappointment a few months later when they found it very difficult to deploy any new funds. This then led to the severe famine last autumn where everyone had to wait several months for things to get back to normal. So if the platform funding is maintained at around 100% it would seem that 7 day deployment is possible for everyone, perhaps with the exception of very large deposits. So do we really need to wait for several months for 7 day deployment when it seems the facility to do this already exists, as long as the platform funding allows it ?
|
|
fogey
Posts: 171
Likes: 104
|
Post by fogey on Mar 6, 2017 1:55:28 GMT
I have to admit that I'm slightly disappointed to find a thread calling for more transparency on BondMason. We work very hard to engage and communicate with clients as well as provide a dashboard of returns as well as a list of positions which is updated daily. I think the issue here seems to relate to two areas: My purpose in starting this thread was not to use it as some form of negative comment on BM. Clearly from recent posts, there is some sort of issue around transparency, so I was hoping that this thread would help to define what the issue really is, from useful replies here.
As you say you are not sure yourself what the issue really is.
If we are not really sure of the issue how can we respond to it ?
So I was hoping for positive constructive replies that could be seriously considered as a way of providing more transparency and thereby resolving concerns that people had expressed recently.
Unfortunately following some initial useful posts, it seems to have turned into some sort of personal boxing match and this will get us nowhere at all.
Hopefully at the start of the working week, this thread will see more rational and constructive replies which was my original intent.
As you say, sensible communication is really the easiest way ahead here, but everyone needs to be clear at the outset as to what the issue really is and then we can look to see how it may be resolved to the satisfaction of all parties.
|
|
fogey
Posts: 171
Likes: 104
|
Post by fogey on Mar 6, 2017 1:12:29 GMT
/mod hat off (having already supplied the required stars, upthread) Yes, it is easy to get money into MT if you are talking 'a few £100', and 'new loans, or new tranches'. If you are looking for £10k or £100k, then be prepared to struggle. Well the problem for me recently is that every day there have been no opportunities at all for me to put any money into MT, so I am surprised that the view here is that now it will be no problem on Monday afternoon and perhaps the next day too ! Yes the amounts are very small but they are a lot bigger than nothing ! I am not using p2p as any serious form of investment so the amounts I am bidding here will certainly not give me any sleepless nights, but thank you everyone for pointing out how risky it can become. I see p2p as a form of snakes and ladders, but where there seem to be far more ladders than snakes at the moment
|
|
fogey
Posts: 171
Likes: 104
|
Post by fogey on Mar 5, 2017 19:41:36 GMT
So is it really this easy to get money into MT ? On these large loans on their umpteenth tranche, yes. 'Want'? Maybe not. They'd probably like to have more, but sensible risk mitigation means spreading any single platform's fund allocation across as many loans as possible on that platform. Given the multitude of other platforms offering broadly similar returns, with broadly similar risks, why have all your eggs in one basket? Well this is only the second basket that I have so far really considered and I seem to remember a sort of recommendation from BM too ! Someone here has even suggested that they are buying into MT at 12% and then flogging it at a "target" rate of 7% +fees. Surely it's not really that easy to make money this way ?
|
|
fogey
Posts: 171
Likes: 104
|
Post by fogey on Mar 5, 2017 18:48:38 GMT
Ok thanks for that at least I haven't been banned (yet). So I will have to join in the fun and games with the asterisks !
|
|
fogey
Posts: 171
Likes: 104
|
Post by fogey on Mar 5, 2017 18:40:30 GMT
As others have said, you are likely to get your £600 and don't forget that: So (up to) £600 after 4pm on Monday and then (up to) another £600 after 4pm on Tuesday and then a free-for-all from 4pm Wednesday. Personally I already have enough of this development so wont be taking anything from this tranche. I'd imagine there'll be plenty of others in the same boat, so it may well go into a third day and beyond. So is it really this easy to get money into MT ? I got the impression that some people here were trying to get as much as they can into MT, so do people eventually find that they have as much as they want ? The perspective on MT here seems to be that it's easy money at around 12% with little risk attached. If this is true why bother with all the other sites which are only offering only around 6% and where it can take ages to get your money in ?
|
|
fogey
Posts: 171
Likes: 104
|
Post by fogey on Mar 5, 2017 18:26:29 GMT
Well I just copied and pasted what was already on the MT site. I see someone has already modified my post here in exactly the way you suggested, but the later quotes still have my original entry.I'm still learning the ropes here so is it against the rules to identify the loan in this way ? I just thought the rules were against being able to identify the posters here ?
|
|
fogey
Posts: 171
Likes: 104
|
Post by fogey on Mar 5, 2017 16:59:26 GMT
New to MT and p2p bidding in general. I see there is ... Further £302,003 drawdown against M********* H*** development coming up tomorrow. I already have funds available to bid but I see there is £600 limit.
If I bid for £600 now much I am I likely to get ? How quickly is this likely to fill, will it last the first 24 hours ? Have there ever been any losses on MT ?
Thanks in advance, going up a steep learning curve here !
|
|
fogey
Posts: 171
Likes: 104
|
Post by fogey on Mar 4, 2017 21:12:00 GMT
Yes please . After getting my confirmation email of 100% deployment on Feb 28th, just a few days later, on March 3rd, I am already down to 93.6%, with no idea of when I might recover back to 100%. Of course this is yet another way that the 7% target is hit and it is frequently happening to everyone here.
I know from posts last autumn, when there was a severe drought of incoming loans, there were priority bands set within the algorithms so that people with the lowest deployment received priority over people at a higher level. In this way there was some process to make the distribution of incoming loans more equitable.
So do people who have managed to slowly claw their way up to 100% then receive any special consideration, or do they just quickly fall back into those bands discussed last autumn ?
When you initially set your preferences to "Automatically Reinvest " you don't really expect to have to wait a long time for this, especially if there are already loans available to fund it.
Apart from the unexpected early repayment of loans, it should be possible to predict the future level of demand for automatic reinvestment and therefore devise a way of handling it, so that reinvestment is performed with the minimum of delay. It must also have been possible to see the oncoming drought last autumn, when part of the problem was apparently due to already known seasonal variations in loan repayment schedules. With a limited number of staff, it is impossible to plan for every known future event of course. But if your business is expanding as quickly as reported elsewhere here, it is simply a matter of acquiring additional resources and putting them into the most productive areas.
|
|
fogey
Posts: 171
Likes: 104
|
Post by fogey on Mar 4, 2017 20:19:54 GMT
Obviously some loans are not performing as expected when the accrued to paid interest conversion has an unexpected negative influence on the total returns.
I am not clear about the remark regarding interest earned on cash, does this mean that sometimes part of deployed funds are treated as cash ?
I believe there is no interest paid on the "cash in bank", especially when it is awaiting deployment in the initial ramp up. Sorry if my explanation is unclear. And to set your mind at ease, there are no unknown unknowns. Everything is always fully reconciled and cross checked. To illustrate with an example (for why processing can lead a downward movement in your overall balance): - 1 Feb: you buy a loan part for £100 with a 12% interest rate - Your account is credited daily with an accrued interest amount (at the rate of £1.00 per month e.g. ~3p per day) - 1 March: your account balance shows £101 with respect to this loan - 3 March: we are notified by the underlying platform that the loan repaid in full on 27 Feb - 3 March: your account is credited with the capital repayment, your share of the cash interest and the accrued interest goes to zero - Because the actual cash interest is 97p but your accrued had ticked up to 1.06p your account will show a reduction of 9p. Hopefully that clarifies why this can happen. We do put a buffer into the accrued interest calculation to account the for this processing delay, but there is no way to get the accrued portion 100% right all of the time. Over time, the relative impact of this on your account becomes less and less. Thanks for this explanation and I can see why an investment in three similar part loans can give a combined accrual rate of 9p per day and how the process outlined above can cause a total loss of accrued interest for that day. I have already termed such days as "sporadic daily loss" days and during my first 90 days here I have already seen two such days which clobber the target 7% very hard indeed, at least in the short term, so I am looking for possible causes.
Whilst your example above is valid for an investment in three part loans, this is far from the typical situation where the investment is spread around 50 loan parts for a 2% allocation. When I had my two sporadic daily losses I had well over 50 loan parts.
For this typical situation and using your process outlined above for 50 similar loan parts, there would be a combined accrual rate of £1.50 per day and therefore the loss of only 9p would have a very minor impact on the end of day balance. I am therefore still unable to understand what has happened during my two days of complete loss of return. In fact the scale of the losses extended further, so that it took not only the full loss of one day's accrual but also a significant part out of the previous day's return too.
My view of the accrual rate is that most of it should come from long term loans (greater than one month) and this should form a stable base on which the shorter term loans will provide a more variable daily component. For a full loss of income over a day it means something has happened which has destroyed that stable base and this appears to becoming more frequent as time goes by, which is contrary to what I might expect. The longer I invest here, the more stable my daily returns should be.
|
|
fogey
Posts: 171
Likes: 104
|
Post by fogey on Mar 4, 2017 19:25:16 GMT
While many aspects of this might be posted under the ideas for improvements, I think it is an area that deserves a space of it's own. Reading through all the posts here, it is obviously a matter which frequently troubles people and as such it detracts from the otherwise very good perspective of most users here. it is obviously an area for improvement and if anything we say here can be improved upon, then it can only be beneficial for both BM and it's investors.
I see BM as a black box: my money goes in and eventually some returns come out, but there seems to be a lot of variability between users as to what is happening to their money in the interim. Perhaps the most annoying aspect is the time for the initial deployment of funds: this can vary from a few days to many weeks and the reason for this is not at all clear. The answer seems to be buried in a series of unfathomable algorithms, which appear to permeate much of the processes within the box.
So is there any way to clear this fog and give investor's more confidence in what is really happening to their money ?
|
|