Each month I do a round up of my ongoing returns from UK peer to peer lending and property crowdfunding (see previous months here). Last month I was on holiday and didn’t do the analysis, so I was eager to see if there had been any big changes!
July 2016-February 2017
Current Amount Invested: £23,619 (across 15 different platforms)
Annualised Return Excluding New Customer Bonuses: 11.19%
New Customer Bonuses Received To Date: £340
New Customer Bonuses In Progress: £420 (Growth Street, Assetz Capital, RateSetter, The House Crowd, Orchard Lending Club)
My annualised returns excluding new customer bonuses fell over the last couple of months from 12.48% to 11.19%, mainly due to more reasonable returns on Property Moose. If you include the received + pending new customer bonuses, the annualised return goes up to 14.4% on my ~£24k investment. I added about £1,000 more over the period and kept reinvesting the returns. The additional £1,000 sum was to take advantage of a special offer on Property Partner (more below in the specific updates).
March 1st Investment Profile
July 16-Feb 17 Returns Broken Out By Platform
Notes on these returns
- I just have one (£1,000) investment with The House Crowd that pays all interest at the end of the loan term, so the percentage return will remain at 0% until then.
- Property Moose returns are mainly from realised capital gains from selling on secondary market.
- Property Partner is less than zero since I recently doubled my investment with two new property investments, taking an instant loss of 2.5% on stamp duty and fees. I use the lowest available share price to price my portfolio at Property Partner. Hopefully the return will recover next month as the properties are released on the secondary market and show a small capital gain. Looking at historic properties, there is usually at least a 2.5% boost: no-one wants to sell for less than they paid.
- Funding Secure is really high, most of my loans are at 12 or 13%, occasionally with 1% cashback on top. I also bought a few late loans at up to 2% discount on the secondary market.
- All my Saving Stream loans are 12%’ers earning 1% per month. When you annualise this it should go to 12.68%. I can only imagine the returns are higher than this (13.1%) due to the buy-now-pay-next-day prebidding system or some rounding error.
- Growth Street and Assetz Capital have a lead time to go up to their target 6.5% and 7.0% returns after an initial investment drag. Each month their returns improve.
My Platform Specific Updates
Collateral have added a pre-bidding feature. As I understand it, half of each new loan is now sold via a pre-bid option, and half is released as before at a set time to the fastest bidders. I’m not sure how it copes with over-demand in the prefund stage, but on the occasion I tried it I got what I wanted. A very welcome addition for investors who can’t make the 10am releases.
I hadn’t invested in Property Partner for 90 days and they sent me a promotional email. They offered 5% cashback on any primary market investment over the next 7 days. Having spoken to several other Property Partner investors who did not receive the offer it did not appear to be widespread. I used it to put £1,000 split equally into the two new properties on offer over the week, so should hopefully get £50 cashback next month.
I have 74 active loans in Funding Secure. At the moment, 9 are late and one of those is in default. I find that sometimes updates are not as good as you would like, but still the returns have been good for me and I’m happy with the level of defaults. My investment has fallen over the last couple of months as I didn’t have enough time to do due diligence. I’ve stopped buying loans on the secondary market because of the large number of late loans.
SavingStream have made some updates to their website and clarification around the provision fund. Now once you log in, you’ll see a ‘Interest Status’ column by each loan. This tells you if interest is ‘Accruing’, ‘on Account’ or ‘Serviced by Lendy’ [Lendy = SavingStream]. This update doesn’t seem to have scared investors: as I write there is next to nothing for sale on the secondary market. When I re-read the ‘how it works’ section of the provision fund (link), it is clear the provision fund is discretionary: if there are too many bad debts not everyone is going to be happy. My current strategy is to just buy new 12% loans (I’m too slow to catch good ones on the secondary market) and sell them when they have about 30-60 days to go.
I like Unbolted, it’s easy to set up and I trust the auto-invest. Unfortunately the new loan volume is small, and recently I can’t even reinvest the funds that are repaid. Also annoying is that you can’t switch off email notifications, so I often have 6-10 emails a day on tiny loan updates that I don’t care about. I am going to try to up my max investment per loan and see what happens, I would be happy to invest 2 or 3 times more in Unbolted if it works (and they update the email notification settings!).
Over the last year Property Moose has been my best performing platform, but in February I my first negative experience. To understand, there were two investments:
- Investment A (SPV 52), launched last July 2016. It was a small part of a large private equity deal on a London development. I bought about £500 at launch at £10 a share. The deal fell through at the start of December 2016 and was converted to a type of loan that would pay 3% cashback up to a point, then 12% gross interest until the end of the 3 year term.
- Investment B (SPV 56), launched last August/early September 2016. It was a joint venture on a student accommodation project that hoped to collect rental yield and resell to an institutional investor at a premium in the future. At the start of February I owned just one £10 share to be able to read the investor updates.
On February 17th we had an email to say that the projected returns on investment B had increased, and that there was an opportunity to convert A shares into B shares. So, I voted to convert my shares. Then, as this opportunity to get more of investment B sounded so appealing, I bought a further £500 of investment A on the secondary market just to convert to B. This was at an average price of £10.15, with a 2% transaction fee on top bringing it to £10.35 a share.
To my dismay, I saw that four days later all of my A shares were just converted back to cash at £10 a share in my account. Property Moose then released about £300,000 of investment B on the primary market for all investors, and used the cash in my account to buy shares. So in effect I bought £10 notes at £10.35 a piece. Pretty bad investment, but at least I had only bought £500 so around £17 lost. I emailed Property Moose support to say it was unfair to charge a 2% trading fee on something you will reverse in 4 days but had no luck getting any of that 2% back (or even a response to my last mail).
I’ve decided to give rebuildingsociety another go, putting a small amount into some of the new loans to see what happens. I had a default from one of my first investments with them, they keep sending detailed updates as to what they are doing to reclaim the money which is a good marketing tactic to show they are working hard! The investments are small in comparison to everything else, so it is more out of interest to see how it pans out and to see if they have improved.
Assetz Capital, Growth Street
I never need to check these two platforms. I switched off all email notifications and they keep chugging away in the background at 6.5%-7% return. Very nice.
RateSetter made a change to their provision fund process a few weeks ago, I wrote about it here. Since then the rates of return have been creeping up nicely, and people have been seeing 6% on the 5 year product. I wonder if this is related to existing investors taking the opportunity to sell out of the 5 year with no penalty fee?
Other P2P Lending News
Kiva Free Trial
Kiva is a charity peer to peer lender that provides micro finance loans to people in developing countries. For International Women’s Day (8th March) they are running a ‘free trial’. In other words they are giving new members a free $25 loan that you can lend to others, and re-lend once they pay back. You don’t earn interest on these loans as it is a charitable act.
To read more about this offer, go to www.kiva.org/investinher.
Before you put lots of charity budget into Kiva, note that the borrowers on the receiving end may have to still pay high interest. The intermediaries that connect borrowers with charity lenders take a cut to cover their costs, which can be surprisingly high. For charitable lending, there is another option called ‘Zidisha’ which is said to cut out the intermediaries and offer 0% interest to borrowers. I haven’t used either of these personally but would like to start trying them out when I have time.
There were a couple of widespread hacks during February, but nothing was confirmed to negatively affect a P2P lending site.
The first was a WordPress exploit. WordPress is a content management system that powers many blogs (like this) and is the basis for a few P2P lending sites (like rebuildingsociety). WordPress spotted an exploit that allowed hackers to access WordPress sites and released a critical update, spurring on hackers to find out what was the original vulnerability. If website administrators were not quick enough to install the update, their website became a sitting duck for hackers. Reportedly over 100,000 sites were hacked, though it was mainly just defacing pages rather than anything more malevolent. At the time in mid-Feb I did a search for all the main hackers with the keyword P2P but didn’t find anything.
The second was a CloudFlare issue that may have led to your private information being released, including passwords. CloudFlare is a ‘content distribution network’ that sits in between you and the end website to speed up loading speeds, reduce the demand on web servers and help to prevent some types of hacks. In this case some bad code caused some private data to be leaked. A large number of websites use CloudFlare, including some P2P lending sites like Saving Stream. Even though the chance of your data being leaked was relatively small (1 in 3.3million requests), it may still be worth updating passwords.
Earlier in February I wrote an article about the benefits of investing at a young age. As this was popular, I wrote a follow-up on the Viainvest blog that looks at some examples for their investors, and the ‘Rule of 72’.
How do I calculate these annualised returns?
I’ve been asked before how I do this annualised returns analysis. Since I’ve invested in about 20 different platforms, I needed to find a consistent method rather than doing each platform on an individual case-by-case basis. I found the most consistent way to calculate annualised returns was to base it on the transactional data from my bank account to log deposits/withdrawals and combine with a valuation snapshot on the first of every month. This excel based process is quite time consuming, I definitely would not do it every month if it weren’t for the blog!
- Download my bank statement of transactions over the last month in a .csv format [5 mins]
- Copy it into my existing Excel Spreadsheet which has previous months’ data. [1 min]
- I add a ‘Category’ column and label each row, either with the name of a P2P lending platform if the transaction is related to them or a general description if not. I have a filter on the first row, so if I spot one called ‘Zopa’ I just label all of these in one go. It helps if you use a specific bank account for all your P2P platforms. This takes about 10 minutes to do the labelling. [10 mins]
- I filter out the P2P rows and copy all the history to a new tab. I only move the date, description, amount and category columns. [2 mins]
- Since I sometimes get refer a friend cashback from people from this blog, it’s not fair to include this in the calculation as it would inflate returns. So I manually add in a deposit transaction as if it were from my bank whenever I receive a refer a friend cashback. [2 mins]
- In the new tab I add 5 calculated columns and a fixed ‘report date’ for when I do the calculation. The first 3 calculations are ‘investment age’, a weighting calculation ‘pound days’, and an ongoing net deposits total. The calculations treat each transaction as a separate investment and give it a weighting based on number of days since the investment was made and the amount. A withdrawal has a negative weighting for all future time. The 4th calculated column is cumulative sum of the weighted amounts for each platform. The final calculation says if the row is the last for that particular platform. [2 mins]
- I filter on the 5th calculated column to just show the last cumulative sum for each platform, then copy these to a new tab. [1 min]
- In the new tab I add in a snapshot of the balance of all platforms on the 1st of the month, by manually logging into platforms and getting the value. I compare this to the net deposits calculation from (5.) to get a net profit. I divide this by the ‘pound days’ calculation in (5.) to get the profit per pound per day of investment. [40 mins]
- I use the figure from (8.) to calculate annualised returns by platform. [2 mins]
- Checking, looking at data and trying to understand why things changed, fixing mistakes. [50 mins]
- I refresh the charts off these numbers and add screenshots to the blog. [5 mins]
[Total Time: 2 hours]
A very long post this time… if you made it to this point! Any comments below much appreciated.