12 Month Results
The first full year results for lending through Funding Circle are as follows –
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 month’s. 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 market place.
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.