Funding Circle – 18 Month Results

18 Month Results

The results for lending through Funding Circle over the past 18 months are as follows –

Expected ROI (Annualised) 7.20%
Actual ROI (Annualised) 8.23%

The ‘Expected ROI’ is taken from Funding Circles own marketing material. The ‘Actual ROI’ has come in significantly higher. The ‘Expected’ figure takes into account a predicted level of defaults, I only had one loan part in the 18 months ‘downgraded’. This meant the loan part in question issued a warning of possible problems with repayments, despite this the loan part still made and is continuing to make repayments, so I think I have lucky with my account performing above average, which explains why I’m currently running over 1.00% above Funding Circles own predictions. This of course is likely to change as loan holdings mature and the likelihood of missed repayments increases.

The other big news for Funding Circle in this 6 month period since the last results, is the conformation of it’s IPO. Due to launch in October 2018 this IPO is highly anticipated as being the first P2P company to IPO in the UK. Other IPOs for P2P companies have previously taken place on the other side of the pond with concerning results. Lending Club IPOd in 2014 with it’s share price dropping 30% within weeks, in now trades (09/2018) at a huge 85.00% discount on IPO price. A similar pattern is being expected by many financial analyst for Funding Circle.

Conclusion

Funding Circle is doing more than enough in both terms ‘Actual Returns’ and future prospects of continued returns to maintain its position as an integral part of my portfolio.

Referral Link For Funding Circle

This link provides a referral bonus of £100 Amazon gift card when a new customer signs up and invests £2000 for a full calendar month using the link (T&C’s apply). The bonus is split £50 gift card to the new customer and £50 gift card to Proptechfish.com Any bonuses received by this blog go towards the cost of maintaining an advert free blog and will be warmly appreciated.

Funding Circle – 12 Month Results

12 Month Results

The first full year results for lending through Funding Circle are as follows –

Expected ROI 7.20%
Actual ROI 6.69%

Since the removal of the manual lending settings were introduced in September 2017, I have opted for the ‘Balanced’ portfolio which estimates a 6-7% annual return. The ‘Expected ROI’ shown as 7.2% is based on the internal account estimate taken from the loan parts I currently hold. So I would put the better than expected rate down to the fact i am probably holding loan parts at a slightly higher average return rate.

The ‘Actual ROI’ comes in at 6.69% for the year. This is still comfortably with in the 6-7% portfolio estimate but falls short of the specific account estimate. I put the sort fall down to primarily cash drag (awaiting for deposited funds to be assigned to loan parts).

I have experienced my first ‘Key Event’ on a loan part within the last 6 months. A ‘Key Event’ is the very first step on the long road to a possible default. When a ‘Key Event’ occurs trading is suspended on that loan part until the ‘Key Event’ is resolved.  Now, ‘Key Events’ can describe a number of things ; from a missed repayment to the company failing to obtain a proposed refinancing deal subject the Funding Circle loan ; or even a big drop in company profits. There is no point stressing or panicking about a ‘Key Event’ occurring with-in your portfolio as it part of the risk you are taking, plus there is nothing you can do about it once it has occurred, you are locked in for ride even if ultimately leads to a default.

This scenario epitomises the importance of ‘portfolio diversification’. If you have a well diversified and balanced portfolio you can out run small hits like this no problem. It’s just part of the game.

Funding Circle the company is still growing rapidly in the first half of 2018, on target to grow loan origination (by monetary value) by a further 50% year on year, circa £2.00B. Grow loan origination (by number of loans) by 40% circa 25000, all while returns for investors have remained consistent. Now it may come as a surprise, given that Funding Circle is by far the biggest player in the P2P market, that they are not actually profitable. They have been profitable in the past but have opted to invest for expansion for the last 2 years with the intention of returning to profitability in late 2018. This is to sure up their number 1 spot in the P2P marketplace.

Going forward Funding Circle has earned is its pretty secure placing in my portfolio, and is easily one my top regarded ‘unsecured’ asset classes based on results, not promises. Despite the companies lack of profitability i am very comfortable with the security and well being of Funding Circle as a company. I find no reason why not to continue expanding my investment within Funding Circle over the coming months.

Referral Link For Funding Circle

This link provides a referral bonus of £100 Amazon gift card when a new customer signs up and invests £2000 for a full calendar month using the link (T&C’s apply). The bonus is split £50 gift card to the new customer and £50 gift card to Proptechfish.com Any bonuses received by this blog go towards the cost of maintaining an advert free blog and will be warmly appreciated.

Funding Circle – 6 Month Results

6 Month Results

The results are in for the first half of investing through the Funding Circle platform and the headlines are as follows –

Expected ROI 6.50%
Actual ROI 5.62%
No. Live loan parts 10
No. Loan repayments overdue 0

When i started investing on the Funding Circle platform you had the option to choose what to to invest in with a variable return based on risk level. This was the case right up until the 18th September 2017 (2 weeks shy of the half year review) so for the purposes of this review I will still assess based on the the original format. As you can see I had 10 loan parts invested in and all 10 performed as expected with none showing signs of default or late payments.

As for the interest rate the small discrepancy between expected and actual can be attributed to account roll up (deposits/investments being accepted, not falling on the optimum day of the month) which is to be expected with manual investments. The second reason for the discrepancy is the £20 minimum investment. This is a mixed blessing because it means there’s usually a residual cash balance (below £20) in the account, good because you can withdraw a little at any time without having to wait for a whole principal repayment, downside would be, it is effectively dead cash ie. not earning interest while it rebuilds to £20 which stunts your interest maximisation.

The changes Funding Circle brought in September basically took away the manual investment option. So you can no longer choose what to invest in, a deposit is just split evenly over the risk range for you, either ‘balanced’ for an estimated 7.5% return or ‘conservative’ for an estimated 4.8% return. Same with selling, you just choose the amount you want to sell and the platform will decide where to sell it from. However the £20 minimum investment remains in place.

In conclusion I’m fairly satisfied with the results so far, no defaults, return is as expected. Minor annoyance with £20 min investment but I get from Funding Circles perspective, it’s to keep transactions down and cost on their end. Role on the 2nd half.

Referral Link For Funding Circle

This link provides a referral bonus of £100 Amazon gift card when a new customer signs up and invests £2000 for a full calendar month using the link (T&C’s apply). The bonus is split £50 gift card to the new customer and £50 gift card to Proptechfish.com Any bonuses received by this blog go towards the cost of maintaining an advert free blog and will be warmly appreciated.

Funding Circle – An Introduction

Introduction

Funding Circle is a peer-to-peer lending platform, who established its UK operations in 2010, although it operates in 4 countries worldwide. The Funding Circle platform offers finance exclusively (as of spring 2017 Funding Circle dose not cater for property ) to businesses for growth and expansion, working capital loans or commercial development.

Funding Circle has an advertised average return of 6.5% ROI after bad debts and charges. This platform also operates a secondary market allowing investors to sell loan parts before term if an investor feels they need an early exit. Secondary loan part sales are subject to buyers being available in the market at the time, so this offers no guarantees of successful loan part sales when an investor may need them. As of autumn 2017 you can no longer manually choose which loans to invest in, you can either invest in a ‘balanced’ (7.5% projected return) portfolio, of a ‘conservative’ (4.8% projected return) portfolio which the platform will then auto diversifies your funds accordingly. You can still sell part or all of your investment based on secondary market demand.

The minimum account deposit for Funding Circle is £100, with a minimum loan part set at £20. Loan terms are usually between 6 months and 5 years. The platform charges investors in two areas, a 1% (of the loan part value) annual service charge and a 0.25% transaction charge when selling loan parts on the secondary market.

The summary account page.

Screen Shot 2017-04-24 at 11.33.48
Image shows the Funding Circle account summary page.

This is what the main account summary page looks like for Funding Circle. It’s very straightforward to understand. The top left box shows your totals in percentages –

Gross yield – refers to your average maximum advertised return across all your current invested loan parts.

Annualised Return – this is your actual annual ROI on all current invested loan parts added to your completed investments in the financial year. The figure also subtracts Funding Circle transaction fees and bad debts incurred.

Estimated fully diversified return – this is your estimated return over all current loan part investments, subtracting Funding Circle transaction fees and bad debts.

The bottom left box shows your all time earnings summary –

Earnings – shows your total paid (interest is only paid the same day each month you first invest in the loan part) return over the lifetime of the account (note: this is a grand total and is not broken down in to tax years, you will need to either work that out yourself when it comes time to pay your taxes, or a separate tax statement is available to account holders). Earnings are broken down into four categories, interest, loan part sales, loan part purchases and promotions. These can been seen by clicking the ‘blue plus’ button next to ‘earnings’.

Fees – are Funding Circle’s annual service charge incurred. The service charge is set at 1% of the value of the loan part calculated over an annual term. In addition Funding circle also charge a transaction fee of 0.25% of the loan part value when selling loans on the secondary market.

Losses – show any bad debts you may have occurred. Losses are also broken down in to bad debts minus recoveries of the bad debt, this can be seen by clicking the ‘blue plus’ button next to ‘losses’.

Net earnings – is the sum of your earnings minus fees and losses.

The box on the right of the screen shows your funds summary –

Funding Circle total – is you total account balance on the Funding Circle platform. This includes any loan parts you are invested in as well as any balance you currently do not have invested in any loan parts.

Accrued interest – is any interest gained by your investments that has not yet been paid in to your account balance (accrued interest can not be withdrawn from the platform until it is paid at the end of the month).

The pie chart– is made up of 3 components; the blue section shows any funds put to a loan part but not yet accepted by the borrower; the green shows any funds accepted and is actively attributed to loan parts. There is also a grey section showing any funds on the account platform that are ‘idle’ or unassigned, this includes interest paid at the end of each month.

Referral Link For Funding Circle

This link provides a referral bonus of £100 Amazon gift card when a new customer signs up and invests £2000 for a full calendar month using the link (T&C’s apply). The bonus is split £50 gift card to the new customer and £50 gift card to Proptechfish.com Any bonuses received by this blog go towards the cost of maintaining an advert free blog and will be warmly appreciated.