Steady as she goes… The peer-to-peer (P2P) sub-sector of alternative finance has suffered some reverses recently. We offer an excerpt from the latest news report from our friends at AltFi, involving a UK fund investing in a troubled French venture, below.
Our take on all this is simple: improperly managed risky ventures will fail (and we make here no specific criticism of the companies in the news story excerpt below). It’s easily avoided by deploying conservatively managed risk analysis. See two recent blogs on this topic:
P2P Global Investments has updated on its numbers for the month of May showing the investment trust had to write down a further investment in Urica, first signalled last year.
May’s returns were impacted by a one-off write down, 0.25 per cent of the total net asset value (NAV) of the fund as receivables relating to the legacy exposure to URICA Europe. Aside from the URICA writedown, the monthly return was 0.53 per cent.
Analysts at Liberum said the hit means further delay to the re-establishment of its target dividend
“The URICA Europe writedown is undoubtedly frustrating and we believe this may delay the potential dividend increase by a further quarter to Q3. The fund’s NAV total return in the two months to May is 7p (0.7 per cent) and we therefore would expect the dividend to remain at 12p for Q2.”
Urica, a French invoice financing platform, when into liquidation one year ago due to major fraud. P2P GI had initially lost its equity stake in the platform but had boped to get back loan assets it also held.
Loan Latest And IFISA Process Guide
That figure is the result of over £17 million of loans facilitated on the site, as we bring individuals looking for a good return on capital together with carefully vetted small companies seeking funds for growth. Bear in mind that lenders’ capital is at risk. Read warnings on site before committing capital.
All loans on site are eligible to be held in a Money&Co. Innovative Finance Individual Savings Account (IFISA), up to the annual ISA limit of £20,000. Such loans offer lenders tax-free income. Our offering is an Innovative Finance ISA (IFISA) that can hold the peer-to-peer (P2P) business loans that Money&Co. facilitates. For the purposes of this article, the terms ISA and IFISA are interchangeable.
So here’s our guide to the process:
The ISA allowance for 2019/20 is unchanged from last tax year at £20,000, allowing a married couple to put £40,000 into a tax-free environment. Over three years, an investment of this scale in two Money&Co. Innovative Finance ISAs would generate £8,400 of income completely free of tax. We’re assuming a 7 per cent return, net of charges and free of tax here.
Once you have made your initial commitment, you might then consider diversifying – buying a spread of loans. To do this, you can go into the “loans for sale” market. All loans bought in this market also qualify for IFISA tax benefits.
Risk: Security, Access, Yield
Do consider not just the return, but the security and the ease of access to your investment. We write regularly about these three key factors. Here’s one of several earlier articles on security, access and yield.