Review: My P2P Lending Portfolio May 2019

I covered my p2p lending portfolio periodically over the past 12 years in this blog. The following report is a snapshot on how it is composed right now (May 2019) and which strategy I will take for the next months. As you can see below I aim for a widespread diversification (over different platforms as well as geographically) of my p2p lending investments.

Mintos

Mintos is my biggest position. I run a trading strategy on Mintos. Mintos gives my net annual return as 15.1%. Calculating it myself based on the deposits and withdrawals I get a XIRR value of 24.8%. The cause for the huge discrepancy is that Mintos does not account correctly for the cashback of the campaigns. I heavily traded, when Mogo ran a campaign. For example I invested in new Mogo loans that were offered with a 2% cashback on the primary market, nearly instantly sold them with 1.8% discount on the secondary market and pocketed the cashback. Rinse and repeat.

Mintos net annual return

I am satisfied with the current degree of diversification over loan originators in my Mintos portfolio. The bulk of my investments is in loan terms between 3 and 30 months at interest rates ranging from 13% to 15%. The lower interest rate loans are usually only held temporary as part of my trading strategy.

mintos portfolio originators

For the coming month I plan to keep my Mintos investment at roughly that amount, reinvesting the paid principal and interest.
New investors registering via this link at Mintos, get 1% cashback on amounts invested in the first 90 days. Mintos is currently not accepting UK investors.

Linked Finance

My second largest p2p investment is on Irish SME loan platform Linked Finance.

linked finance portfolio

Diversification achieved is good. The majority of my loans have interest rates between 8% and 11%. Most loan terms are 2 or 3 years.

linked finance portfolio diversification

I “collected” 7 loans in default (double dip on the golf loan). But 5 of these had repaid more than half the principal before they want into the default state so the principal in default sums up to only 270 Euro. My self-calulated XIRR value is 6.4% if I totally write off the amounts in default and 7.1% if I assume that half the amount in default will be recovered. I plan to slightly increase my Linked Finance portfolio in the next months. Linked Finance is not offering any cashback or bonus rewards for new investors.

Bondora

Bondora is my third largest and oldest (still running) p2p lending portfolio. I started in 2012. My self calculated XIRR value is 16.6%. A yield that high is not achievable nowadays anymore. My portfolio profited heavily from the first years when interest rates were typically 28% to 34%.

bondora portfolio profitability

I am currently investing into Estonian A and B loans using these autoinvest settings. I have used these settings unchanged for 11 months now and it is running totally hands-off with no maintenance required.

bondora portfolio pro autoinvest

On Bondora I reinvest the bulk of my repayments and occasionaly withdraw some funds. New investors registering on Bondora using this link get a 5 Euro sign-up bonus.

Ratesetter Australia

Ratesetter Australia is my fourth largest p2p investment and also one of my youngest. I started in August 2018. My XIRR value self calculated in AUD is 9,1% if I include the 75 AUD sign-up bonus and 7.4% if I do not include that.

ratesetter australia account

My money is mostly invested on the Ratesetter 5 year market at an average rate of 9.2% (that is after fees but before withholding tax).

ratesetter australia loans

In the past months the interest rates have dropped considerably therefore I am parking some funds on the 1 month market or invest them on the 3 year market.

ratesetter australia rates

I am reinvesting all repayments at Ratesetter Australia. If rates go up again I plan to do that on the 5 year market, otherwise I’ll settle for the 3 year market. It is a little complicated to register as a non-resident, but I have described how I managed to sign up as a European here. New investors can earn a 75 AUD promotion bonus by investing 2,000 AUD or more in our 3 year Income or 5 year Income lending markets before 31st May 2019. Achieving that requirement in time will not be easy, even if you start directly.

Iuvo Group

The fifth largest position of my p2p portfolio is invested at Iuvo. It is running hands-off and does not require any maintenance.

iuvo group portfolio

I continue to reinvest all repayments. Iuvo pays new investors a very generous cashback of up to 90 EUR. For more details and how to get it see the cashback overview page.

Estateguru

estateguru portfolioAfter I completely exited Lendy in last autumn, baltic Estateguru is now my largest platform for property secured loans. I don’t use the autoinvest. Instead I periodically login and manually invest into a new Estonian loan secured by a first rank mortgage.

I mostly reinvest all repayments. New investors get 0.5% cashback for all investments in the first 90 days, if they sign up using this link.

Fellow Finance

I used to have a larger portfolio at finnish Fellow Finance but I did not want to go below 12% for 4 star Finnish consumer loans therefore I started withdrawing funds last year. In January the sale price collections paid tor Finnish loans dropped from 70% to 53% which reinforced my decision to exit.

fellow finance portfolio

October

I am running down my portfolio on French SME loan marketplace October. With the low interest rates and rising defaults (6 out of 52 loans) in my portfolio the risk reward ratio is not for my taste anymore.

october loan portfolio

New investors signing up on October using this link can get 20 EUR bonus (200 Euro minimum investment)

More p2p lending marketplaces

Due to professional interest (want to gain first hand experience) and curiosity I have more p2p lending portfolios at Ablrate (small, reinvesting), Assetz Capital (tiny, reinvesting, possibly increasing), Bulkestate (tiny, testing), Crowdestate (small, reinvesting), Finbee (tiny, nearly exited), Investly (small, reinvesting), Lenndy (tiny, watching), Monestro, (tiny, exiting), Moneything (small, exiting), Neofinance (small, testing, probably running down), Reinvest24 (small, testing), Robocash (small, reinvesting), Zlty Melon (tiny, exiting next month when terms are up).

Crowdinvesting

Not p2p lending but investing in startups. I am a huge fan of Seedrs. Investing in startups is of course even higher risk than investing in p2p lending. Nevertheless I went ahead and built a big Seedrs portfolio over the last years. Snapshot:

seedrs portfolio

P2P Conference Riga

I am looking forward to be at the P2P Conference in Riga which is less than 4 weeks away. The conference is reasonably priced (enter promotional code P2PEARLYBIRD40 for 40% rebate) and Riga can be reached with cheap flights from many European cities. BTW, Riga is an interesting town, if you have not been there yet you could combine the conference with some sightseeing.

Growth of Investor Numbers on P2P Lending Marketplaces

Today I take a look at the recent development of investor numbers on several p2p lending marketplaces. I chart relative numbers with the index set to 100 for June 1st, 2018. The advantage of using indexed numbers for this comparison is that platforms use very different definitions for their investor base size. Some count registered investors, some count investors with deposits, some count active investors, some count recently active investors, … .

The disadvantage of showing indexed numbers for growth is that it gives smaller, younger an advantage as their percentage increase of investor base is likely still higher because they come from smaller absolut numbers. An example for this effect is Peerberry where percentage growth of investors is rapid, but the absolute number as of Sep, 1st has reached only 2468 investors as it is a very young marketplace.

P2P Lending Investor Statistic
Indexed investor numbers (with June 1st, 2018 = 100). Peerberry exceeds the choosen display scale – value for Apr. is 66 and value for Sep. is 183
Reading example: On Sep 1st the index value for Mintos was 123, meaning Mintos had 23% more investors than on Jun. 1st

Interview with Kristjan Koik, CEO of Flender

Flender launched a year ago. What did you achieve since launch?

  1. We have funded c. 1,300,000 EUR deals through our platform and we are proud that our defaults have remained at 0%.
  2. We have just finished equity fund raise where we raised successfully 800,000 EUR from world’s biggest VC Enterprise Ireland and private investors.
  3. We have strengthened our credit team with head of credit Colin Barry who came from AIB Bank and David McNamara ex director of Merrill Lynch International Bank. David has joined our credit committee and board of directors. This all means that our lenders can be assured that Flender has best in class underwriting practices.
  4. Following due diligence, Price Waterhouse Coopers is heading our debt raise from institutional finance providers.

We offer very attractive 10-11.5% interest rate to our lenders. Current default rate is 0% and our world class credit team will ensure great returns to our lenders.

You now want to raise a 50M Euro debt package. What will that be used for?

Funds will allow:

  1. Accelerate funding of the deals on our pipeline
  2. Loans on our marketplace will get funded quicker
  3. Offer bigger variety of credit options to borrowers such as higher ticket loans and property backed peer to peer loans

Can you please give details about the planned launch of property finance loans?

Our target market will be property developers and builders looking for working capital towards last phases of construction. Target loan size is 250,000-750,000 EUR.

Kristjan KoikHow will these loans be secured?

Loans will be secured against 1st legal charge on the property

What interest rates can investors expect on the property loans?

8-10%

When will we see the first property loan listed on the marketplace?

We are aiming for May 2018

You recently repaid a convertible loan. Why did you decide to repay that loan rather than convert this into equity stakes in Flender?

This was condition of our new equity investor. Investment allowed us to repay our loan participants with very generous 12% return.

Flender holds permission to lend in the UK. How are your plans progressing to offer loans in the UK market?

Our plan is to expand and grow our brand in Ireland. We will review our launch plan for the UK towards end of this year.

What are the main challenges in growing the business right now?

Now that our platform and model have been proven then our goal is to scale up. We would need to grow both the number of retail lenders and involve institutional finance for this.

We welcome your readers to participate in campaigns on our marketplace.

Can you share some demographics on your (retail) investor base?

  • Ireland 58.41%
  • United Kingdom of Great Britain and Northern Ireland 14.86%
  • Germany 13.74%

You have one wish that the regulator fulfils for you. What is your wish?

We would welcome EU wide regulatory framework for p2p platforms.

P2P-Banking.com thanks Kristjan Koik for the interview.

Review of My Linked Finance Investment After 6 Months

Six months ago I started a portfolio on Irish p2p lending platform Linked Finance. As my overall p2p lending investment was heavy on Baltic and UK platforms I wanted to diversify geographically. And Linked Finance is an established player. The marketplace started 4 years ago and attracted institutional capital earlier this year.


Linked Finance offers loans to Irish SMEs; click for larger image

I started in February with a 1,000 Euro deposit via SEPA transfer. Loans on Linked Finance have terms of either 12, 24 or 36 months and are assigned credit grades by Linked Finance. Both together determine the interest rate.

I use the Autobid (autoinvest function) to invest. While it is possible to make manual bids, many of the smaller loans are funded in minutes.

linked finance autobid
My Linked Finance autobid settings – Click for larger view

Over time I have done multiple deposits and increased my total deposited investment to 6,350 Euro. The processes are smooth, there have been no bugs and Linked Finance is a most hands-off platform requiring almost no attention by me. Loan supply is a little volatile. It has slowed down in summer. However most loans are for 36 months; due to my autobid settings I skip many of those.

Linked Finance dashboard
My Linked Finance dashboard – click to enlarge

The best part of my Linked Finance experience is that so far all payments have been made on time. Certainly I expect that there will be delays and defaults, but I appreciate that there have been none so far and this confirms the very low overall default rate Linked Finance shows in its statistics

The only disadvantages of Linked Finance are:

  • 1.2% fee for investors
  • No secondary market

My self calculated ROI so far is 5.6% (XIRR), but some of that is due to the initial cash drag and this figure will rise. I plan to further increase my Linked Finance investment to a portfolio size of 10K.

Another, very recently launched Irish p2p lending marketplace is Flender, which currently runs a 10% cashback promotion (minimum investment of 2,500 Euro to be eligible). Investors that want todiversify their investment across p2p lending marketplaces in Europe find a list of options here.

Irish Linked Finance secures full approval from UK regulator FCA

Linked Finance announced yesterday that it secured full approval from UK regulator:

I’m delighted to announce that we recently gained full authorisation from the Financial Conduct Authority in the UK. This approval is the culmination of a rigorous 2-year application process and a lot of hard work.

In the absence of any regulatory framework in Ireland, we originally began this process as a way to demonstrate our commitment to operating Linked Finance in line with best practice from the much more developed UK market.

This UK approval also opens several exciting avenues to us in terms of our plans for future expansion. It gives us the opportunity to attract lenders form the UK to support Irish SMEs. It would also allow us to start supporting SMEs north of the border, as well as paving the way for a full UK roll-out.

The P2P industry in the UK is the largest in the world on a per capita basis and platforms there are originating more than €1 billion in lending each quarter. It would be a logical next step in our evolution.

That said, our primary focus remains on Ireland and helping to grow the sector here as market leaders.

This authorisation in the UK won’t have any major impact on how you use Linked Finance but you may see some slight changes and modifications on the site, as we look to implement some of the various requirements, such as warnings and disclaimers, that would be required when operating in the UK.

The fact that we have gained full authorisation from the FCA should simply serve to underline that Linked Finance has developed the type of management processes and controls that are in line with industry best practice.

The timing couldn’t be better too.

This announcement comes as the Irish government have launched a public consultation in relation to regulating the sector here.

It’s a move that we wholeheartedly welcome. We believe that all platforms who want to operate in Ireland should be required to operate to the same high standards as Linked Finance.

Obviously, this approval from the FCA demonstrates that we are well ahead of the curve in the Irish market and we are encouraged that the Department of Finance is now considering a similar set of rules here.

We recognise that the development of P2P lending in the UK owes a lot to the introduction of government initiatives that promote the industry, including tax-free Innovative Finance ISAs and direct government lending to SMEs, via the British Business Bank, on platforms such as Funding Circle and RateSetter.

We would love to see the same type of support here and we will be using the current public consultation as an opportunity to promote similar initiatives in Ireland.

For our Irish lenders, this approval from the FCA in the UK should serve as further evidence of our commitment to developing a strong and stable platform that will continue to deliver healthy returns while providing much need credit to great local businesses.

Flender – new p2p lending marketplace in Ireland

Flender, which recently soft launched a p2p lending marketplace in Ireland, received full FCA authorisation last week, saying it took two years of consultation with the FCA and the legal team to achieve approval. This will be needed for the launch in UK, planned for later this year.

Limited time offer: Cashback: 10% cashback on any investment over 1,000 GBP for P2P-Banking reader.  Sign up to use. (Update Aug. 2017: the cashback offer has been extended to August 31st, the minimum investment requirement is now 2,500 EUR)

Flender offers both SME and consumer loans on the marketplace. The main points for investors are:

  • no fees for investors
  • 50 Euro minimum bid
  • open to international investors (prerequisite is a bank account in the European Union)
  • interest rates of the currently listed loans range from 8.1% to 10.4%
  • reverse auction bidding (though at the moment, loan supply outstrips lender demand, therefore I don’t expect any underbidding soon). currently no autoinvest

Flender charges origination fees for business loans from the borrower. While there are no origination fees for borrowers for consumer loans, Flender does have a margin income on those (same with business loans).

Once the UK operation launches, investments can be made cross-border. An interesting aspect is that the borrower will take the FX charges.

Flender does have big plans. On the list are an IFISA offer, several features for investors and borrowers to customize the experience and mid term a secondary market. Flender currently has a team of 7 employees.

I published an interview with the CEO of Flender in the end of 2016, when they raised 500K GBP through equity crowdfunding on Seedrs. Flender will likely be back on Seedrs to raise another round later this year.

As my experiences with another Irish p2p lending marketplace are good so far (it has low default rates), I registered on Flender too. There are currently 4 business loans listed seeking a total amount of about 150K Euro.

Flender marketplace
Screenshot of Flender marketplace loan listings (excerpt)