Mainstream Fund Shows Signs Of Life - Plus Loans Latest
The troubled P2P Global Investments fund, on which we've reported here several times, has changed its name and finally reports some improved figure after some painful investment offloads.It's long been our view that the best way to profit from platform lending is to choose a platform with a conservative selection policy and risk analysis, and spread investments across a range of borrowing companies. Investors in quoted funds have had a tough time of it.But – maybe – that could change. AltFi takes up the story.
The £1.1bn Pollen Street Secured Lending fund saw returns improve in the third quarter of 2019 as the fund continued to shift towards whole loans back by property.Pollen Street Secured Lending, which sits on a 12.4 per cent discount to its net asset value (NAV), saw a return in NAV terms of 1.65 per cent in the three months to the end of September.During this period the fund's manager, Pollen Street Capital sold its largest position, its stakes in Castlehaven Finance, an Irish alternative development and bridging finance lender. This included a 25 per cent equity stake in Castlehaven Finance, together with other loan and debt interests.The gross proceeds of c.?250m, have started to be deployed with four deals closed in October to deploy the proceeds of the sale.Following the sale of the Castlehaven position, the portfolio mix has shifted slightly with a higher weighting of whole loans, according to analysts at Liberum. Real estate remains the highest sector weighting with 41 per cent of the continuing portfolio."The continuing portfolio has delivered consistent underlying income returns in the year. The overall NAV return was impacted in the early part of the year by issues relating to the legacy portfolio. The impact of the legacy portfolio and equity positions should decline as the exposure decreases. The sale of the Castlehaven equity position reduces exposure to equity investments from £45m to £34m," Liberum said."
Mar-Key 6, rated A+, is 23 per cent filled at the time of writing. The yield on offer is 7 percent. Platform lending of the kind we facilitate here at Money&Co. can be a lucrative activity. The average yield achieved by our registered lenders over more than five years of loan facilitation on this platform is more than 8 per cent, before we deduct our one per cent charge. That return has handsomely outperformed retail price inflation, which has averaged around two per cent over this time.
Of course, there's no profit without risk. We vet potential borrowers extremely carefully, but there is a bad debt rate, albeit a small one, of an annualised 0.04 per cent across five years and some £18 million of loans. We make a point of highlighting the risk that comes with P2P – see the foot of this article for a full examination of risk, access and yield provisions, the risk warnings on the Home Page, in FAQs and elsewhere on site.
The second tranche offered by Yes You Can is a B-rated offering, over a five-year term, with a fixed rate yield of 11 per cent gross. It is presently 11 per cent funded.
Historical Performance And IFISA Process Guide
Money&Co. lenders have achieved an average return of more than 8 per cent gross (before we deduct our one per cent fee).
That figure is the result of over £18 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.
Money&Co. has been lending for over 5 years and has only had one bad debt so far, representing a bad debt rate of 0.03 per cent per annum.
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:
Step 1: Register as a lender. Go to the login page, and go through the process that the law requires us to effect. This means we have to do basic checks on you to comply with money-laundering and other security requirements.
Step 2: Put money into your account. This is best done by electronic transfer. We can also process paper cheques drawn in favour of Denmark Square Limited, the parent company of Money&Co.
Step 3: Buy loans in the loan market. Once you've put cash in your account it will sit there - and it won't earn interest until you've bought a piece of a loan. It's this final step that requires lenders and IFISA investors to be pro-active. Just choose some loans - all loans on the Money&Co. site can be held in an IFISA - and your money will start earning tax-free interest.
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.