My top 10 marketplaces (as of 31.12.2017, part two)

As announced before, here is the second part of my top 10 with ranks 6 to 10 (follow me to places 1 to 5). A reason for the splitting was that my first post was long (approximately 850 words) and I did not want to bore you with 1’700 words in one post.

RankPlatformYield (XIRR)Link to posts
6Viainvest11.93%Viainvest
7Linked Finance9.63%Linked Finance
8Lendix6.97%Lendix
9Marketlend12.23%Marketlend
10DoFinance12.02%DoFinance

Viainvest

Viainvest loses one rank and resides no in the bottom five. One reason for this move ist hat they lowered the interest rate on Spanish loans from 12 to 10 percent. I don’t know if this is just a test by Viainvest to see if these loans get sold at a lower rate or not. Or if they had more defaults then expected in that market and want to increase their margin (more defaults -> more capital needed)? This is just speculation. On the other hand my cash quota increased a little bit, which is not making me happy (but far from frustrated). At the end of the day Viainvest is a stable marketplace, with a solvent owner (Via SMS Group).

Linked Finance

Irish marketplace Linked Finance climbs 3 places and ranks now at number 7. The Reasons: I am with the platform for more then one year now and did not have any defaults. Only one loan was delayed and on the first day of the delay I got a message from Linked Finance and they got in touch with the borrower. After some days the payment was received and the borrower respected the schedule. The Irish marketplaces seem to know their business (check out Flender for example). There are lots of new loans, but they get filled very quickly. You will need to configure an autoinvest. I am happy for Linked Finance that their business seems to grow.

Lendix

French marketplace Lendix seems as well to have a good credit scoring system. I am with the platform for more then one year and I have not experienced any delay nor default. The support works outstanding. The interest rates were relatively low compared to the baltic marketplaces, from the beginning. In my opinion Lendix loans should better be compared to corporate bonds then Baltic Loan Originators. So with this point of view I don’t care about the lower rates (they are still very good). During the last weeks I noticed a drop in interest rates. Further two loans were paid back prematurely (at least I got 2% Bonus interest). I guess the borrowers found a cheaper source of funding. So I guess we won’t see any rise in interest rates in the coming months. For the first time I invested in a Spanish loan, hopefully I won’t regret this decision (according to stats there are no defaults from Spaniards during the first 7 months since launch).

Marketlend

My only platform from Down Under (are there even more?) makes me happy. Payday is on the firth of every month and no payment was missed so far. I doubled my holding there. Transferwise borderless account offers a personalized AUD account now. This makes transfers between accounts really easy. I already tested it (if you withdraw you have to fill out a kyc/aml procedure and give some informations plus utility bills etc (as with any other platform in the UK for example).

DoFinance

This special, from the handling point of view, platform performs very well. DoFinance informs me when loans get repaid and I can reinvest smoothly. There is not a lot say more at the moment. We need to see how this plays out, the loan originator and the marketplace itself are pretty young. Please remind yourself that if you cancel an investment before maturity, you can loose all interest accrued.

There are other platforms which I considered for the top 10. Flender for example, no payment delays etc, but the funding period is too long and only a little dealflow. If this will be better, then I guess Flender is a top 10 candidate. Peerberry as well would be a valid candidate, but the marketplace is too young at the moment for a serious consideration. Iuvo is not bad either, but not top 10 material at the moment.

That’s it for now, hopefully you found something interesting.

Brickowner with a real estate development project (32.66% yield)

I have already written some stuff on Brickowner in the past. Brickowner got my attention on Seedrs, where they were raising funds. Meanwhile they successfully had two funding rounds in which I invested as well. So I am a (minor, 0.0001%) shareholder oft he marketplace. I tell you this for transparancy reasons. I will express my own opinion impartial.

What did Brickowner achieve so far?

Besides the two mentioned funding rounds there are already 4 projects financed, two are still funding at the moment, although one (Nash) will close imminently I guess. Yet 44 to 59 investors have participated in the projects and the investment sums were between GBP 35k and GBP 101k, relatively small. I already invested in some of those projects.

What’s the current project about?

The current project, Regent House, blasts the prior projects in terms of volume (1.7 Mio GBP) and expected yield (32.66%). The prior projects only filled very slowly, so how on earth shall such a big project be funded? I remind you that Brickowner does not originate the project itself, but works together with asset managers which want to open their projects to retail investors. This case is special as Brickowner provides its platform to a real estate developer and does the administrative task for him by handling the investments and client onboarding. This can increase growth drastically for Brickowner, if more such projects can be launched.

The project itself is a commercial property which will be converted into an apartment building (one to two bedrooms) with a retail space on the floor ground. The rebuild should take about 12 months. A part (1.7 Mio of 5.8 Mio GBP) is being financed through Brickowner.

What are the risks?

It should be clear that you don’t get 30% yield without risk in only 12 months (btw 3% comissions is deducted up front from your investment). Investors participate as equity investors through a SPV. So if there are problems, this will reduce the expected yield and it might turn in to a loss. There might be delays which means that your capital is bound for more than 12 months. A lot can go wrong (but it does not have to of course): Anticipated sales prices are too high, generally cool off of the property market etc.

As I see it, the rest of the needed capital is being raised with a senior bond which has a superior claim on the assets before the SPV investors are in the queue.

Conclusion

I have already invested in this project, knowing that I could lose money if all goes wrong. This has to be clear to everybody who considers to invest (and is applicable to investments in general). I don’t want to be a naysayer, but I find it crucial that the risks are understood (especially in this case). I believe in this project; this is why I put my money in there.

For new investors there is a cashback available. If you register through this link and invest at least GBP 1’000.- (does not matter if in one project or 10 different over time) you will get GBP 50 as a reward (I get a commission myself). If existing Brickowner investors ask themselves why they did not get a notice about this project from the platform. Easy answer: First the Brickowner people and involved parties will invest. Then it will be publicly announced. I like this mechanism as it builds trust (to me at least) if the people in charge are in the same boat with me (risking their own money).

My Top 10 p2p marketplaces (per 31.12.2017, part one)

Ok, it is time again for my semi-annually top 10 p2p marketplace ranking. Actually I wanted to publish it earlier, but hey, even a hero needs a break from time to time ;). The ranking reflects my personal opinion (yours can be different). On my decision several factors had an influence, I am not solely focussed on return. This is my last overview with this layout. I will change it plus develop a scoring model, where some (predefined) factors will have a (wheighted) influence on the total assessment. There is already one new thing: I will split the places 1 to 5 and 6 to 10 in two different posts.

RankMarketplaceYield (XIRR)Link to the posts
1Mintos17.23%Mintos
2Grupeer13.91%Grupeer
3Robocash12.88%Robocash
4Lenndy13.17%Lenndy
5Estateguru10.47%Estateguru

Mintos

Mintos did it and is according to my opinion the best p2p marketplace (jumped from 4 to 1) available at the moment. Even the Eurocent problems could not change anything about that. There is no other platform who has a similar loan supply at the moment. Further there was a 5 cashback scheme in December (currently there is a similar scheme on Mogo loans until February 17th, and one on Lendo until the 18th). So currently the investment on Mintos is lucrative.

Just let us think about the costs such cashbacks genrate. I guess the loan originators and Mintos share the costs, but I don’t know for sure. The whole thing has its impact on profitability, so I am eager to see their 2017 figures. It seems Mintos wants growth at all cost.This cannot only be positive. I can imagine that Mintos never will be overly profitable (or must be). I guess the marketplace is seen as a source of financing by their owners. I will write down my thoughts in a different post on this subject. For what it’s worth, there seems no way around Mintos at the moment.

Grupeer

No change on rank 2 versus mid year 2017. Grupeer is still flying below radar in my opinion. Mostly you get 14% interest rate, sometimes additional 1% cashback on top. They have developped and rolled out a new product (Russian SME loans) successfully. They did not increase their business much more as they first look to set up everything in terms of regulation. This makes sense as this is the basis for more growth. Given the small number of loans I can ignore the fact that there is no auto invest so far. I track all repayment dates in my calendar. If there is a premature repayment I get a hint by email from support. So I am ok with that for the time being, but I expect something to be done in this regard in 2018.

Robocash

Well, Robocash loses 2 places and still gets away with bronze. Occasionally there was a drought in new loans, so we had a cash drag. At the time being the situation seems to have eased. The handling was never quite easy when changing the portfolio, I had to intervene manually (this is better now). Should you by accident have kicked in the withdrawal mechanism, it could have resulted in multiple payments (from EUR 50 on) which you really didn’t wanted. Further a loyalty scheme for the first 1k investors was announced, but never materialized (at least so far). It is not a big deal and I can life without a goody (especially on 14% yield), but I like to stay informed. I really understand their focus right now on increasing the loan supply further.

Lenndy

Lenndy as well lost one rank, but still stays at the great fourth place. Interest rates are declining since some weeks and are around 12 to 13%, depending on duration. They would like to introduce SEPA payments since months but can’t due to missing IT ressources. So we still need to use Paysera instead a bank account (I do like paysera, just for the protocol). It seems that there were some errors at Paysera during 2017, which led to a CEO replacement. This has nothing to do with Lenndy, but I think investors should know (our funds were always safe though). Positve is the loan supply, there is always something to invest in. In case of delayed loans, the platform provides regular updates which is nice. I like to be informed if something does not go according to plan.

Estateguru

The only «true» p2p marketplace in the top 5 gains one rank, congrats Estateguru. The loan book has increased drastically while interest rates remained the more or less the same. They created a information system which now shows to ivnestors, which measures were taken when a delay occurred. There is room for improvement though as it looks like that sometimes no action is taken even if there should have been one. Further there are loans which are clearly delayed for more than 45 days and should be marked as “default” which does not happen. But we could see that the first loan which did not pay back for a long time was auctioned. After one week the property was sold and investors got their principal plus interest back. This is great as it shows that mechanisms in place plus valuation work (even though the borrower finally paid)! Hopfefully this will be the same with coming loans (although I do not hope we need to test this too much all 😉 ).

Regulation of p2p loans with focus on the Baltics

The p2p market is relatively young, the first continental European platforms started back in 2008. New business ideas often are that new, no regulations and laws are in place. In this setup the regulator and the marketplaces need to work together to creating a framework which is compatible with the current legislation. This is partially a long process which needs an open mind from both parties. Sometimes these new business practices contradict to the legislation in place and it is not possible to make both compatible. This happened in the case of Lenndy, a Lithunian marketplace, which did not receive a definitive licence to operate from the Lithunian Centralbank (they operated under a provisional licence until then). The problem was that in Lithunia only “real” p2p lending (= borrower and investor meet directly through a marketplace) and crowdfunding are allowed. The whole buyback stories, where securitized (= already issued loans) are sold to investors was prohibited by the Lithuanian Centralbank. So we take a look at Latvia (where to Lenndy migrated).

Latvia, hotspot for p2p marketplaces

It’s no secret that mostly buyback platforms have settled in Latvia. The current regulation there is mostly ok (for the moment) with this form of financing. The regulator has a close eye on that sector and has sometimes a say. Have you asked yourself why Mintos for example amends its contracts, mostly the Latvian’s, from time to time? That’s the reason. It is a myth that there is no regulation of the p2p sector in Latvia. It is rather the case that there are provisional legislations which are not binding to date.

The regulator asks the marketplaces for even more things and is not stringent (and sometimes contradictive) in its claims (according to a lawyer I know). This results in a more or less chaotic environment where the marketplaces have to maneuver. Most of the platforms will in the end get a definitive licence in Latvia, as they can afford the manpower for dealing with legislation. It comes as no surprise that since spring 2017 only one new platform stepped on to the Latvian carpet: Peerberry. This is the platform of Lithunian loan originator Aventus Group. They seem to be confident to be able to fulfill the regulatory requirements.

These platforms operate in a grey area of regulation and there can always be the case that there will be a court ruling, which forces marketplaces to take certain measurements. It has happened in August for example, when all hipocredit loans where bought back from one day to the other. There were speculations that only good performing loans were bought back etc. Fact is that at that point of time a Latvian court ruled that selling private debts to private investors is illegal in Latvia. This case came up due to questions of the banking regulator and the consumer finance protection organization. As per a similar reason the Latvian Mogo loan contracts were restructured. The Latvian court rulings affect only Latvian loans and originators who offer loans in the country. Other regions are not affected by the Latvian rulings. Changes in legislation in Georgia led Mintos to change the structure as well (respectively the loan originators). Per January 1st 2018 the regulation in part of the consumer loan sector changes, so here as well some measurements must be taken. You see, there will come a lot of work for the p2p platforms. I do not want to create any fear with this post, but I think we as investors should be aware of the circumstances in the markets we invest. It is pretty normal if you open up new business fields that the regulator comes and wants to fulfill its assignment. Regulation in an adequate doses is beneficial for all parties!

Estonia, the next destination?

In the Baltics, there is only Estonia left which is home to some p2p Marketplaces already. Especially crowd investing platforms from the real estate sector are already there, like Estateguru, Crowdestate and Bulkestate (which was founded in Latvia, but moved to Estonia due to a better regulatory environment for real estate platforms). But there are more examples which offer real p2p: Investly, Monestro, Bondora and Omahara (there are few more). What was missing were the buyback platforms.

Latvian buyback platforms tried during Summer to get in contact with the Estonian Regulator to discuss scenarios under which they could relocate to Estonia. The Estonians blocked though, as per Estonian Law a marketplace (like Mintos, Swaper, Twino, Viventor etc) must not belong directly or indirectly to a loan originator. This is why their plan was relinquished.

Buyback platforms exist despite this law in Estonia (at least one): Die Iuvo Group (moved from Bulgaria to Estonia) is located in Estonia and possesses the needed licenses (financial company und payment agent) to operate in Estonia. I don’t know how the setup is with Iuvo to make it work in Estonia, but it works 😉 I know that there is one platform from Latvia which will announce its move to Estonia shortly as well. It seems there are ways for buyback platforms to get established and operational within Estonian boarders.

The case of withheld interest

What since last summer is courant normale in Lithunia, is only practised in Latvia by ViaInvest: Withheld interest. One can ask here: Why does ViaInvest do that and other marketplaces not? The situation in Lithunia is clear (although there seems to be a free threshold of EUR 500 from 2018 on): Interest received by non Lithunia residents are subject to a partial withholding tax. The Lithunian Centralbank has decided in that way. What about Latvia? For Latvia as well a withholding tax should be applied to foreign investors, but it seems to be only a provisional rule and marketplaces are not obliged to follow at the moment (according to the info I got from my known lawyer). At least the marketplaces see it that way, although the authorities might have a different opinion. As long as there is no definitive ruling in that matter the platforms will continue as did (ask for certificate of tax residency, withhold taxes on Polish loans, or nothing at all). According to my contact only ViaInvest is dealing the right way with the withholding tax. I guess we will therefor see other platforms to play along and ask for certificates at least. Just for your info to be prepared (and not surprised ;)).

Conclusion

You see, there is a lot going on in the p2p sector. As time passes by the platforms and the authorities will settle their differences. Until then, it will be interesting.

If you would like to discuss this issues, just post a comment.