Portfolio Review – 2018

It’s been a mixed bag for my Investment Portfolio in 2018.

The losers

Collateral UK – announced it was entering administration in February 2018 following instruction by the UK regulator (FCA). It would appear Collateral UK were operating without the necessary regulatory permissions. The administration and wind up of this loan book continues at a frustrating slow pace. At this moment in time I’m still recording Collaterals balance within my portfolio as i am none the wiser on a possible recovery figure approaching 12 months after commencement of the administration. I have however revised any projected future (since February 2018) return on investment to zero. If recovery is anything close to zero it will put my overall portfolio at a serious loss.

Lendy – has had a really rough year with as much as 60.00% of it’s live loan book falling behind or in to default. This has given rise to an onslaught of lender anger towards the platform with many lenders choosing to withdraw all available balance and leave Lendy as a sore memory, including myself. This mass withdrawal has only exacerbated Lendy’s liquidity problem. Furthermore legal action is now under way by a borrower against approximately 5000 lenders and Lendy itself, a situation nobody predicted or even considered possible. This action has only further infuriated many lenders and is proving to be a further nail in the coffin for Lendy’s future. As well as this many Lenders decided to vent their frustrations via Trustpilot reviews only to have anything even slightly negative removed within minutes and replaced by what appeared to be entirely contrived and possibly paid for reviews, this further added fuel to the fire and ruined any integrity Lendy might have held with many lenders. Lendy attempted to end the year a note of humility by issuing a formal apology to all Lenders for the situation, I believe for the first time. However there may be a feeling of far too little too late, with a growing sentiment of not if Lendy go under but when. Obviously Lendy are no longer active within my portfolio going forward but I will continue to report every 6 months while funds remain outstanding on the platform.

Funding Secure – has also had problems with defaulting loans, dubious valuations, inadequate communication and poor levels of recovery. Now I’ve never really had the confidence in Funding Secure or received high enough returns to get significantly invested, so although I have reduced my holding to a handful of unsellable loan parts my return to date is not too bad and providing the remaining loan parts see some decent resolution over the next few months it’s possible Funding Secure may retain its place in my portfolio going forward, at least in a small way. I am however aware, and sympathetic of individuals who have been acutely and severely affected by losses thorough Funding Secure, so I remain unconvinced for now.

The stand out performers

Funding Circle – IPO’d back in October 2018 and it’s share price plummeted over the following weeks by as much as 45.00%. I have also heard of many bad experiences and criticisms particularly over a number of loans Funding Circle issued that subsequently defaulted prior to even a first repayment. To date I have only recently gained my 2nd downgraded (problematic/defaulting) loan part which makes up a small proportion of my overall return, in fact my rate of return for 2018 ended a little north of 8.50%. Funding Circle remained unprofitable in 2018 and no doubt the sizable drop in share price hurt a little but as a result of the IPO Funding Circle should be well funded for the next year and I would hope they return to a profit and reduce the need for an extensive market budget in 2019.

Money Thing – out performed any other platform with a return of over 10.00% in 2018. This is partly down to a few loans offering cash back and subsequently not filling or being relaunched meaning cashback was earned without the long term commitment of principle. Moneything has been one the fairest platforms in my experience in dealing with lenders in 2018, reaching out to it’s lender base for recommendations on how to get sizable loan offerings filled and actively engaging in feedback on how better to deliver it’s platform to the market. For me it’s still relatively early days on the platform and I’m yet to realise a default whereas others with much longer experiences of Moneything have and suffered sizable losses as a result. For that reason I don’t expect 2019 to deliver quite as impressive returns, but right now I really rate Moneything.

We Lend Us – soft launched in December 2017 and from nothing has grown it’s loan book to over £1.5 million by the end of 2018, made up of maximum loans of just £500. We Lend Us only offer short term, payday style loans so it’s offering is inherently risky coupled with it’s infancy so I’m still progressing very cautiously. That said with a 2018 return over 8.00% I can’t, not consider We Lend Us as standout performer. I have had some specific issues with communication but I can put that down to early day growing pains and I don’t see it as a major concern. For 2019 I’m expecting a further improved return as well as the platform maturing in to sizable force with in the short term lending P2P sector.

Unbolted – again delivering north of 8.00% in 2018 has to be considered a stand out performer. I would describe Unbolted as ‘a quite grafter’, it gets the job done as expected without much fuss, other than that there’s not really much more to say. I’m anticipating more of the same in 2019.

Ablrate –  is the newest of the standout performers in 2018 reaching over 8.00%  projected annual return on investment in just 8 months. It could be higher if I chose to utilise the secondary market place to buy up more discounted loan parts. Ablerate as a company seem to be a well run outfit able to attract a higher caliber of loan offeringing than some platforms. Again it’s still early days for me on Ablrate so I’m yet to experience any major issues with my loan holdings, although I have had late payments the speed (usually within a few weeks) these issues were resolved puts most other platforms to shame.

 

My outlook for 2019

Possible portfolio additions

I constantly look to strengthen and evolve my portfolio and one way of doing this is by adding new P2P platforms to the portfolio. I currently have 47 platforms (mostly P2P) listed at various stages of due diligence and review. 10 of these are short listed and maybe added in 2019. These include –

Propify – A UK property development loan P2P specialist that utilises blockchain technology, due to launch in early 2019 (I’m a minor shareholder).

Landlordinvest – A UK rental equality P2P platform with returns of up to 12.00% pa.

Kuflink – A UK short term P2P loan specialist dealing mainly with property, returns of 7.20% pa.

Relendex – A UK commercial property P2P lender, returns up to 10.00% pa.

Crowdstacker – A UK business P2P lender, returns up to 7.50% pa.

Lending Crowd – A UK business P2P lender, returns up to 6.00% pa.

Thincats – A UK business P2P lender, returns of up to 7.50% pa.

Crowdproperty –  A UK property specialist P2P lender, returns of up to 8.00% pa.

Crowd to Fund – A UK business P2P lender, returns up to 8.70% pa.

Linked Finance – An Irish business specialist P2P lender, returns up to 12.00% pa.

Expectations for my portfolio. 

As my portfolio continues to mature and I weed out under performers I would like to see a further stabilisation of monthly returns but with a backdrop of consistent growth in 2019. Although I managed growth in every month of 2018 a couple of months were very close to the wire. I’m fully anticipating one or two P2P platforms to call it a day or be forced to call it a day in 2019 for which I hope I am sufficiently positioned to not be too acutely affected.

The year ahead for the P2P industry.

For the P2P sector specifically, despite early signs of a movement of high street banks back in to the ‘risker’ areas of lending that P2P now operate in. I think P2P will continue to grow on a loyal lender base that high street banks have shunned for the last decade with negative interest rates (considering inflation). The stronger P2P platforms will thrive while the less well run will fold to increased competition. A longer term prediction in to 2020/2021 is we could well see acquisitions of P2P platforms by not only other P2P platforms but also established high street banks as they look consolide the competition.

There has been some talk of a tightening of regulation in the P2P sector, while I think further regulation is inevitable I think it’s a little late in day to see any major changes take effect in 2019, although we may see some more detailed proposals take shape.

I would say the most likely P2P platform to IPO next (out of those I review) would be Landbay, possibly within the next 3 years.

The UK Economy as a whole

I think the overriding theme for the economy as a whole will be uncertainty, while Brexit remains outstanding. The Bank Of England will seek to increase the base rate if the economy allows it. There may be a slight cooling (I think a 30% drop is ludicrous) of house prices across the country while persistent uncertainty encourages potential buyers to sit on their hands. I think London will be hit harder by a cooling in house prices because it has further to fall. I actively try to avoid investing in London because of this.

I think stock markets will continue to fall in both the US and the UK for the first quarter of 2019, with a possible stabilisation around mid 2019. I sold out of my stock funds some months ago but I’m anticipating a re-entry into a UK index tracker for around April 2019.

Finally

I started this blogg two years ago with little more intention of compiling a written record of my journey in to P2P lending, made public so as to introduce P2P and relevant various platforms to individuals who are quite frankly fed up of getting a raw deal from complacent high street banks offering negative returns (considering inflation) on their hard earned and saved money. I have been truly humbled with how this blog has grown in reach over the last 12 months with no formal marketing spend, visitors have increased by 70.00% year on a year while views have increased by an unbelievable 200.00%.

So I sincerely thank you for your unexpected but greatly appreciated support over these last two years and I will continue to review platforms, and report my experiences as frankly and honestly as I am able to. I wish you all a prosperous 2019 and may we all continue to grow for the better.

MoneyThing – An Introduction

Introduction

Moneything is a family owned , self funded, P2P business launched in 2015. Moneything are fully authorised under the FCA as a P2P lender. They provide a mix of loans across multiple sectors, but all loans are asset backed. Moneything offer risk based returns from 10-18% per annum. There is a £1 minimum deposit/minimum investment on the platform, all investments must be made in whole pounds. Moneything also operates a secondary market place should investors wish to exit a loan early, subject to buying demand. There are no charges for selling or buying on the secondary market.

Moneything has seen significant and sustained, year on year growth since its launch. Cumulative lending for 2016 was £99M, 2017 £269M, growth in every quarter. Interest earned has increased £141,874 in Q1 2016 to £886,005 in Q4 2017, an increase in all but one quarter. Moneything experienced it’s first defaults in 2017 (7.7% of total loan value) and is expecting further defaults in 2018. Defaults are part of P2P lending and should be expected in small amounts on any platform.

Moneything Loan Page

Screen Shot 2018-08-05 at 17.57.03
Moneything loan page

Asset Details – a brief description of loan on offer.

Loan Value – total value of the loan being requested.

Asset Value – total value of the asset being loaned against.

LTV – loan to value of the asset being loan against.

Rate – the annualised investor return being offered on the loan.

Bidding Start – the date the loan opens for bids.

End Date – the date the loan term is due to end.

Available – the amount of remaining loan available for investment. If it’s highlighted in yellow there is an amount available on the primary market, if it’s highlighted in green, there is an amount available on the secondary market place.

Invested – is the current amount you have invested it that loan.

Drawdown – the loan has been drawn down and is being utilised by the borrower.

 

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.

Landbay – 12 Month Results

12 Month Results

The first year of investing through Landbay is up, and the results are as follows –

Expected ROI 3.68%
Actual ROI 3.28%

As you can see the the ‘expected ROI’ has dropped marginally. This is because most of the investment is in a fixed rate of 3.69% however this fund was closed a few months ago, with the the new fixed rate fund offering 3.49%, as the returns are reinvested in the new lower rate fund this is causing a downward pressure on returns.

What is less easy to explain is the increased deficit between ‘expected’ and ‘actual ROI’. It is true February is a shorter month which would have a marginal difference on the run rate of ROI at this time of year. The other factor that could be causing the gap to widen is a significant drop in demand. Now considering Landbay reserve the right to queue funds in times of exceptional demand for up to 6 weeks, something i witnessed early on in this fund (informed by a notification on the fund at the time) this is not something i have witnessed since. Along with this the time that monthly returns are queued for reinvestment seems to be increasing, sometimes as long as 2 weeks. This could be indicating a significant drop in demand for new investment.

Now the length of the queue for reinvestment should not have a negative impact on returns as Landbay is one of the few platforms that accrue returns on queued investments. Looking at the wider situation, Landbay is heavily London centric (55.01% Greater London) and average London house prices have fallen back 1.5 – 2% over the last 12 – 18 months , with predictions for 2018 seeing a further drop. This will no doubt cause some pressure on the Landbay portfolio but still does not fully explain the deficit. Fund roll up (first month not being a complete month) from my own strategy could also play a part, although this was not evident in the 6 month review. I have contacted Landbay for further clarification on the cause of the drop in return and will report back as soon as i have a response.

As mentioned previously, the latest fixed rate fund is now at a lower 3.49%, this fund is also now based on 25 year mortgages (as of January 2018) rather than previously 10 year mortgages. This is not necessarily a problem as Landbay do offer sell out early options (dependant on a buyer being available) but it does indicate Landbay seem to be seeking increased stability.

As for Landbay’s future within my portfolio, February 2018 has been the first month i have experienced an issue with the expected rate of return, of course i will look in to this further before drawing a definitive judgement. It has always been difficult to get excited by Landbay’s rate of returns (current 3% inflation) with not much more than 0.5% annual return in real terms. That said i still view Landbay as a foundation fund to a diversified portfolio, but it’s meagre returns are restricting me to keep Landbay as a  relatively minor player in the overall portfolio. One big plus for me staying with Landbay beyond the returns, is it’s substantial wealth of research on the UK property market, which has been invaluable in constructing pieces for this blog. Landbay’s place is safe in my portfolio for the time being.

Referral link for Landbay

This link provides a referral bonus of £100 when a new customer signs up and invests £5000 using the link (T&C’s apply). The bonus is split £50 to the new customer and £50 to Proptechfish.com, any bonuses received by this blog go towards the cost of maintaining an advert free blog and will be warmly appreciated. 

Collateral UK announces administration.

The UK based P2P lender Collateral UK announced today (28/02/2018) it has formally entered administration. The platform was taken offline on Monday 26th of February 2018 with nothing more than a ‘server upgrade’ landing page in it’s place. As speculation grew on forums over the next few days, from the plausible to out right ridiculous, as to the cause of this suspension in trading, a letter from the administrator was finally released late this evening.

The administrators letter cites the reason for the administration as ‘ The Company was operating in the belief that it was authorised and regulated by the Financial Conduct Authority under interim permission. It has transpired that this is not the case and consequently the Company has ceased lending ‘.

It is still very early stages in proceedings but it would appear invested capital will be secured and wound down in an orderly manner. However it is yet been clarified what will happen to cash on account, what will happen to investments not yet drawn down, what will happen to this months interest due tomorrow morning and if or when the platform will go back online. If the platform does not go back live, many investors maybe left scratching their heads in obtaining exact and up to date figures of what they have on the platform. This could cause difficulties with capital claims or tax filling.

Emotions are still raw at this time and it would unwise to speculate further on how this situation came about in the first place. Undoubtedly more will be revealed over the coming days and i will update accordingly. However some comfort should be taken from the fact this is by no means the worst case scenario, if played out as purported investor losses should be minimal if any.

This is exactly why all investments carry risk.