seabbs
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Post by seabbs on Aug 22, 2017 8:40:35 GMT
I am really not clear what the advantages of a p2p system like zopa's (which is why I withdrew) or now FC are over an investment fund. Can anyone think of any? If the aim is to achieve the average performance why not make everyone share the risk across the whole loan book! Do you guys think the next transition will be to a shared risk model? I guess the advantage is that it is easy for the average user to understand...
As you pointed out if you continue to have individual holdings as a subset of the loanbook then individuals with small holdings will get large amounts of variation. Everyone invested will also be exposed to risk depending on when they invested to some degree. Although this obviously gets diluted with time as loans are repaid and the alg buys into new/sm loans.
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pandas
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Post by pandas on Aug 22, 2017 8:51:07 GMT
Can someone explain how this is legal? My understanding has always been that the agreement is between the borrower and I, with FC acting as a matching platform. The new system requires selling my loan parts, and bundling them with everyone else's. How is this allowed?
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Post by kerimar on Aug 22, 2017 8:53:01 GMT
Certainly heading for an investment fund by the look of it. It would certainly be fairer all round. This will be like a lottery. Some will do well, most will do ok but a few unlucky ones will get a higher % of bad debt than others through no fault of their own. Not even an option to sell older loan parts first to withdraw some capital. People like us got FC off the ground but I fear we have outlived our usefulness to them. The big boys are moving in, hence the Fund type approach.
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SteveT
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Post by SteveT on Aug 22, 2017 8:54:44 GMT
Can someone explain how this is legal? My understanding has always been that the agreement is between the borrower and I, with FC acting as a matching platform. The new system requires selling my loan parts, and bundling them with everyone else's. How is this allowed? Why do you think this (in bold above)? The contractual relationship between borrower and lender doesn't change, AFAIK, merely the scope for selecting manually which loans you buy into or sell out of.
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nrw
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Post by nrw on Aug 22, 2017 8:57:14 GMT
Your 'system' requires there to always be a buyer whether they like it or not .. basically 'pass the toxic parcel and hope someone else is holding it when it implodes'. It favours someone who actively manages their portfolio every week, day or ideally nanosecond, to comb out the toxic junk .. note the word 'favours', which implies 'unfair'. If you reckon you can beat the system by deciding what to sell when, then you are also implying the lucky recipients of what you sell are going to come out worse than if you didn't have that option. Saying 'yeah well they can do the same to someone else' doesn't actually address the issue, just kicks it down the road. I really don't understand this argument. If you follow it then all share trading should be banned. As should selling bonds and loans. And property or any asset really. Some people think something will go up in price / is a good credit risk. Others that it will go down / is a bad credit risk. This difference of opinion means you can trade the asset and both sides are happy. Everyone joins FC to get "above average returns" namely better than a random bank account. Should that be banned? Should everyone get exactly 0.5% on all their money. I have no problem if people get better returns then me by putting in more work / taking more risk / being smarter than me. All i care about is that the return i do get is decent. FC is very different from share trading and the two cannot be compared. The point is that the underlying assets/companies/bonds with publicly traded shares/units are highly regulated and subjected to onerous reporting and governance requirements - thereby protecting retail investors (and others). This is not the case with FC loans, hence retail investors need protecting - either by a 'fair' portfolio approach (which FC has chosen), or restricting investment to sophisticated investors only (which LendInvest has chosen).
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Post by kerimar on Aug 22, 2017 8:57:24 GMT
Can someone explain how this is legal? My understanding has always been that the agreement is between the borrower and I, with FC acting as a matching platform. The new system requires selling my loan parts, and bundling them with everyone else's. How is this allowed? I haven't read about selling all the loan parts we already hold. Very good point about the Agreement but I'm sure they've covered themselves somewhere.
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nrw
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Post by nrw on Aug 22, 2017 9:00:52 GMT
I am really not clear what the advantages of a p2p system like zopa's (which is why I withdrew) or now FC are over an investment fund. Can anyone think of any? If the aim is to achieve the average performance why not make everyone share the risk across the whole loan book! Do you guys think the next transition will be to a shared risk model? I guess the advantage is that it is easy for the average user to understand... As you pointed out if you continue to have individual holdings as a subset of the loanbook then individuals with small holdings will get large amounts of variation. Everyone invested will also be exposed to risk depending on when they invested to some degree. Although this obviously gets diluted with time as loans are repaid and the alg buys into new/sm loans. FC's revised approach is definitely closer to a fund than the previous approach, however there are some key differences - see my previous post in this thread comparing FCIF and FC. Principally, most funds' price fluctuates and they often trade at a premium / discount to their net asset value (NAV) - however investing on FC will generate returns directly correlated to the performance of the underlying loans.
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seabbs
P2P Blogger
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Post by seabbs on Aug 22, 2017 9:35:38 GMT
Yes, I saw that - sorry I should have made myself clearer. I didn't really mean a comparison with a traditional traded fund. I more meant what advantages are there over the zopa/FC model of each investor holding a subset of the loan book as opposed to every investor having a share of every loan (i.e a pooled loan book). If your portfolio exactly matches the loan book you remove the issue of individual variation. The only two I can see are simplicity for the user and ease of regulation (as it is more hands off).
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seabbs
P2P Blogger
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Post by seabbs on Aug 22, 2017 9:37:31 GMT
Obviously, a shared loanbook would be hard for them to retroactively implement. It might be a separate product down the line or just something they have to compete with.
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Post by grahamreeds on Aug 22, 2017 10:05:42 GMT
Latest thought:
There will be a massive glut of C/D/E being shifted at par on the 18th.
When a new joiner on the 18th invests their hard earned savings into this new fangled P2P thingy will they pick up mainly the C/D/E which people are offloading?
I have shifted half of my stick with a small premium but wary of turning on the patented FC (un)lucky dip engine.
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bg
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Post by bg on Aug 22, 2017 10:17:38 GMT
Latest thought: There will be a massive glut of C/D/E being shifted at par on the 18th. I don't think there will be. I think many people will keep running their legacy portfolios of C/D/E and pick up the high carry while withdrawing repayments/selling down as required.
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markr
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Post by markr on Aug 22, 2017 10:35:51 GMT
I think we were expecting something like this, and I think I welcome it; if I stepped back and took a rational look I would conclude that I now spend far too long messing about with FC for the uplift in return that it generates.
I spent yesterday rebalancing my flipper portfolio, reducing the loans I'm overweight in and buying parts on the SM to replace them. Fortunately, I didn't have much else to do so I could spend the day watching the SM and it was quite interesting.
In the morning, there was huge piles of par loans available, presumably as people logged in to see the news and decided to sell out. The market for small (<£40) parts at par became quite cyclic, oscillating between almost nothing and bucketfuls. I wondered if a lot of flippers were doing as I was, selling a bit, buying a bit, etc, and had set up some kind of "resonance", but it could just have been very large accounts selling out. Activity peaked around 11am, when the website became noticeably sluggish. I fell victim to the "selling loan parts twice" problem a few times, so I've had to ask FC to reconcile my account to recover some lost funds.
In the afternoon and early evening, activity slowed a bit and it was possible to make out individual portfolios being dumped onto the market. At one point a huge pile of D and E parts appeared, presumably a disgruntled roboteer bailing out since they were parts no mere mortal would ever have seen on the PM. I'm now the owner of a part-worn part of a £9000 E band loan; I wonder how long that lasted on the primary market!
There was lots of stuff to be picked off in the tails of seller's portfolios too, old favourites from the days of witty loan titles and variable rates. Plenty of parts that were well above the average rate, that would once have been held aloft as trophies by the closing-seconds-rate-chasers of old. This sort of stuff is well over the "hump of maximum risk" and is a real bargain IMO.
There's still a bit more shuffling to do (property mainly) and I'll have a look through my parts and throw back any I don't like the look of before it's too late, although I'm in around 2000 loans now so nothing more than a cursory glance. Hopefully I've set myself up with a reasonable manual portfolio to start off with (my dashboard EFDR is now 8.2%), then I'm happy to let FC's Bid-O-Matic loan randomiser take care of repayments while I find something else to occupy my time.
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Post by grahamreeds on Aug 22, 2017 10:50:14 GMT
Latest thought: There will be a massive glut of C/D/E being shifted at par on the 18th. I don't think there will be. I think many people will keep running their legacy portfolios of C/D/E and pick up the high carry while withdrawing repayments/selling down as required. You don't get to decide what to sell when you sell after the 18th. So the only way to be sure is to sell everything. People who have picked the max return will pick up those CDE while the conservative users will be insulated from that.
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bg
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Post by bg on Aug 22, 2017 10:57:36 GMT
I don't think there will be. I think many people will keep running their legacy portfolios of C/D/E and pick up the high carry while withdrawing repayments/selling down as required. You don't get to decide what to sell when you sell after the 18th. So the only way to be sure is to sell everything. People who have picked the max return will pick up those CDE while the conservative users will be insulated from that. Yes but as long as you are diversified you will most likely be getting an above average return. Then if you want to reduce the portfolio over time you can. I'm not sure what you mean by the only way to be sure.
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Post by wangja on Aug 22, 2017 11:06:46 GMT
Looks like FC is effectively been turned into a dumb collective fund. It not what I signed up for so I'll be withdrawing my funds and investing elsewhere......
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