P2P Investing

beh · 13 Oct 2016 at 12:10

A good analysis of RS published last week - https://www.orcamoney.com/blog/Ratesetter-review-loanbook-analysis

...investors are exposed to every outstanding loan on the loan book and not to their specific P2P loan contracts.

This is different to both Funding Circle and Zopa, where investors are exposed directly to their P2P loan contracts.

Mercenary Keyboard Warrior · 13 Oct 2016 at 12:32

beh said:
A good analysis of RS published last week - https://www.orcamoney.com/blog/Ratesetter-review-loanbook-analysis

Bad article.

Hes incorrect on the selling of investments and hence I have to conclude he hasnt done a proper evaluation at all.

When selling investments there is no fixed fee (but a typical one), also you have to pay back interest (based on a formula) so his statement "If the difference in rates between the 5 year market and the 1 year market is greater than 0.72% and you are investing for at least 1 year, you are always best selecting the 5 year market." is completely incorrect. BUt its quite difficult to explain the difference without a quite detailed example.

RS are looking to change the definition of the Resolution event, they say its too old now. And how the articles writer knows how the resolution event would happen is beyond me, because RS won't say specifically.

Most of the stats and data are straight off RS site, you would gain more info from the independant p2p forums, where RS as well as investors post.

But with all that said, whilst I believe hes mis targetted his risk, he does reinforce that there is some risk and thats what people have to remember.

LionOfJudah · 13 Oct 2016 at 12:37

I'm tempted to invest with rate setter or Savings stream.
Has anyone invested as SIPP through them?
Do they do refer a friend and if so - does anyone want refer a friend - please message me
thanks

Mercenary Keyboard Warrior · 13 Oct 2016 at 12:37

I went a little through a sale of investment, as far as i could and this is clear from their site

* Requests to Sellout are subject to availability of funds and at RateSetter's discretion.

* Fees are dependant on current market rates. The actual fees may vary slightly due to movements in the market.

My example certainly listed sellout well below 0.72%, the kicker is the longer the investment has been in force the larger the sell out fee because its clawing back interest paid at a higher rate than the alternate market you should have been in for a shorter term investment.

Mercenary Keyboard Warrior · 13 Oct 2016 at 12:40

LionOfJudah said:
I'm tempted to invest with rate setter or Savings stream.
Has anyone invested as SIPP through them?
Do they do refer a friend and if so - does anyone want refer a friend - please message me
thanks

Sent you a RS one

not done a SIPP but am waiting for the ISA personally when I will switch most of my current funds to that stream
AFAIK they all function exactly the same

beh · 13 Oct 2016 at 13:11

When selling investments there is no fixed fee ... BUt its quite difficult to explain the difference without a quite detailed example.

Would you say that level of complexity is perhaps an issue? The detail is not something I've looked into for RS as my money is mostly in rolling.

RS are looking to change the definition of the Resolution event, they say its too old now. And how the articles writer knows how the resolution event would happen is beyond me, because RS won't say specifically.

Aye, I've read that RS are intending to clarify things. How/when it would be triggered is the detail that's lacking. The analysis is just an idea of how the default rate would reduce the returns and where it might lead to a loss of capital.

you would gain more info from the independant p2p forums, where RS as well as investors post.

Agreed, http://p2pindependentforum.com/ is a great resource and platforms like RS that engage directly with investors should be the norm. Oddly enough this is where I saw the article linked.

he does reinforce that there is some risk and thats what people have to remember.

It's a reasonable overview of how their business works and where some of the risks might lie.

Zopa and RS are very different platforms in many ways. For me there's no reason not to invest with both.

Mercenary Keyboard Warrior · 13 Oct 2016 at 13:35

beh said:
Would you say that level of complexity is perhaps an issue?

I can see the logic in their original thinking.
Its to try to stop people doing exactly what he says to do which is pick the longest term and sell out.
What they do is to revert the total interest earned to the equivalent from the previous level down that you would have completed, but with the withdrawl of the 3 year its now a little dubious.

People complain its not transparent, and if you run a calc thats absolutely correct.
However I prefer the fees calc being loaded this way to a fixed one that would penalise heavily right now.
Eg i could sell out a £1000 5 year amount right now and cost me about £5. If you placed £1000 in a 5 year bond you would see significant fees right now. for sell out.

From what i can tell they are working on these sorts of issue as they grow. The one big difference between p2p right now and traditional banks is that they react and change quickly, where as banks take forever to change.

beh · 13 Oct 2016 at 14:04

I see a couple people have challenged the 0.72% figure on the P2PIF thread and that it apparently only refers to an "average" fee quoted by RS.

Actually does sound like a fairly sensible approach.

Englander91 · 15 Oct 2016 at 18:40

Huzzah, RS let me re-register with a referral fee, so I've got an account with them now. The rates are a little lower than earlier in the week so I'll give it a few days before committing.

I'm planning to put a bit in the 1 year market (what I can afford to lock away for that long), and then put the rest in the rolling market which I need a bit more liquidity with.

fredwi · 15 Oct 2016 at 22:21

Glad you got it sorted you can either check the rates or set your own rate and it will go at that when your matched

Englander91 · 15 Oct 2016 at 23:00

Question about reinvestment settings: is is alright to let it reinvest at market rates, or is one likely to be able to readily access better rates if one does it manually? Or am I over-complicating it?

DIABLO · 16 Oct 2016 at 00:27

Englander91 said:
Question about reinvestment settings: is is alright to let it reinvest at market rates, or is one likely to be able to readily access better rates if one does it manually? Or am I over-complicating it?

Generally the interests is lower at night when the loans are repaid so you will more often then not get a few fractions of a percent higher if you manually set it.

DJMK4 · 16 Oct 2016 at 15:44

I currently have some excess savings £6.5k in temp premium bonds until I can find somewhere that you dont have to jump through multiple hoops to get a very small return on, I started the premium bonds beginning of this year so not lost anything, I have won £25, but want to see if I can see if I can shift this in to something that will give me small amoun of return over the next 6-8 months.

I cant use another ISA at the moment as I am using a Halifax help to buy ISA 4% which is coming down to 3.5% in december.

Someone mentioned P2P investing but I don't like the word risk, when im potentially looking to use the funds to buy a house, whats the deal with this?

I'm looking at other low options 6 month tracker bonds etc

Englander91 · 16 Oct 2016 at 15:50

DJMK4 said:
I currently have some excess savings £6.5k in temp premium bonds until I can find somewhere that you dont have to jump through multiple hoops to get a very small return on, I started the premium bonds beginning of this year so not lost anything, I have won £25, but want to see if I can see if I can shift this in to something that will give me small amoun of return over the next 6-8 months.

I cant use another ISA at the moment as I am using a Halifax help to buy ISA 4% which is coming down to 3.5% in december.

Someone mentioned P2P investing but I don't like the word risk, when im potentially looking to use the funds to buy a house, whats the deal with this?

I'm looking at other low options 6 month tracker bonds etc

There is an element of risk, but the way it typically works is that borrowers pay an extra fee which goes into a "provisions fund", to use the example of Ratesetter. This fund covers any defaults and protects lenders. To date, it has been 100% succesful and no lender has ever lost capital. More facts can be found out about that sort of protection here: https://www.ratesetter.com/invest/everyday-account/protection#popf

As you can see, the provision fund currently stands at 129% coverage of expected losses.

DJMK4 · 16 Oct 2016 at 16:06

I'm not sure if this would be any good for me, as I am potentially going to be using the funds within a year. Looking at it maybe something I will keep an eye out for down the line though as it seems interesting. cheers for the info

Englander91 · 16 Oct 2016 at 16:09

DJMK4 said:
Im not sure if this would be any good for me, as I am potentially going to be using the funds within a year. Maybe something I will keep an eye out for down the line though

Well that would be where the rolling market came in - your money is only locked away for 30 days at a time, and even then you can withdraw it without penalty.

So in my case, I'm splitting some money and putting it in for a year, whilst maintaining good liquidity by keeping the rest in the rolling market.

DJMK4 · 16 Oct 2016 at 16:14

Englander91 said:
Well that would be where the rolling market came in - your money is only locked away for 30 days at a time, and even then you can withdraw it without penalty.

So in my case, I'm splitting some money and putting it in for a year, whilst maintaining good liquidity by keeping the rest in the rolling market.

Ah ok, so there is a short 30 day option, I will read further

Englander91 · 16 Oct 2016 at 16:20

DJMK4 said:
Ah ok, so there is a short 30 day option, I will read further

Reading a bit more myself, I may have simplified it a bit. If I'm not mistaken, repayments are made in monthly instalments, and then typically re-invested automatically according to your preferences. But then, yes, you can withdraw your capital at any time with no penalty, the caveat being that you might have to wait a few minutes for another lender to fill the gap you create as you come out of it.

Englander91 · 18 Oct 2016 at 10:14

Deposited and matched some money on the rolling market @2.7%

Quite exciting, really.

Diddums · 18 Oct 2016 at 11:06

Is it worth chucking £100 in here just to see how it goes? Can I even deposit that little? How often do I have to babysit this? Can I fire and forget or do I have to reinvest once the loan term's complete? Sorry for the noob questions, just wondering if I should look in to this or not.