Update to risks with foreign currencies

As I told you in January, I just have updated my update to the foreign currency development against the Euro. The Euro gained traction against most other currencies during the first quarter of 2018. There might be many reasons for that, I just want to point out three of them. 1) Economy looks good in the Eurozone (mostly all over) 2) There is a sense of politial stability in Europe at the moment and last but not least 3) The guy in the USA is always good for spreading some uncertainty (which drives Investors out of the USD into different valuta).

Again I had a look on a 10 year period, I just rolled one quarter further. This means we are looking not at the period from March 31st 2008 to March 30th 2018 (March 31st 2018 was a Saturday, so the period closes on Friday 30th). There were some changes which you can clearly spot in below illustration. Please note that the comparison is beetween 10 year periods, this means we are comparing December 31st 2007 to December 30th 2017 with March 31st 2008 to March 30th 2018.

Source: Bloomberg / own calculations

As you can see the Euro gained strength againgst Swiss Francs, British Pound, Georgian Lari and the Australian Dollar. It lost a little bit against the Polish Zloty and the Czech Krona during the period. As the Danish Krona is pegged to the Euro, there was no change. Graphically it looks like this:

Source: Bloomberg/own calculations (31.03.2008 – 30.03.2018)

Most impressive are the Euro movements against the Swiss Franc and British Pound. As the Franc lost, the pound gained (so now may be the time to go into the Euro, if you are a GBP Investor ;)). GBP Investments gained nearly 8 percent in the last three months against the Euro. This shows really nice, that currencies can easely fluctuate in double digits in several weeks. During crisis the fluctuations normally are bigger (look at the annual tables below). It is not bad to think twice before going into a foreign currency. It might pay off, or not, but you need some mental strenght at some point to hold through ;). If you decide to buy some foreign currency, you should look for low change fees (low spreads). Most of the time your bank will charge you more then some specialised companies would. Check out Transferwise, Currencyfair (40 Euro Bonus) or Revolut.

Source: Bloomberg/own calculations; annual returns

here the othere currencies in tabular form:

Source: Bloomberg/own calculations; annual returns

Conclusion

This was it with the pdate to the currencies. If you want to have added more currencies to the overview, drop me a line. I will gladly take them into consideration. The next update will follow in July. Last but not least, appologies for the silence during the past weeks… I had some technical difficulties.

Crowdestate: Autoinvest and secondary market explained

There are a lot of new features at Crowdestate during the last few weeks. After I did an update not long ago, secondary market has been released. Nice thing to offer a possibility to liquidate to the investors. Firstly I want to tell you some things about the autoinvest feature, as you have only slight chances to invest manually on the primary market, despite the recent increase of new projects.

Autoinvest

Projects yielding about 10 percent or more with a volume below 1 million Euro it is hard to bid manually, as all is sucked up by autoinvest settings nearly instantly. This means that sometimes not all investors using an autoinvest get their bit of the project if the demand is too big (which happened to me before). As per Crowdestate’s statement older (date of inception) are prefered to newer autoinvests. So I suggest you set up an autoinvest immediately after sign up. I set my autoinvest very wide barriers. All types of projects which yield at least 12 percent and have a duration of less then 24 months are allowed to invest. Maybe I will increase the duration as I got a secondary market at disposition. As new projects are announced 24 hours prior the first capped bids can be made, I still have a chance to pause my ai for that project if I dislike it (I am not sure if this would change my ai’s inception date though, but I don’t think so). Given there is only one project added at the time being. As per mentionned reasons I relinquish to fine tune my autoinvestment settings. But you can set it really subtle if you like to.

Secondary market is (still) lucrative

This week I discovered the secondary market randomly, I do not remeber having received a message about the implementation by Crowdestate. For the fun of it I put my project up for sale which I invested in a week earlier, with a premium of 2 Euro, which is 2 percent on my 100 Euro investment. I did not check if it has sold, and did not receive a confirmation. About 2 hours later I have received a message that my bid to the new project which went open for capped bids in the meantime was confirmed. In the background my sale went through within minutes and my autoinvest hit again with the money I just received form the sale. With a holding period of one week and an investment of 100 Euro I made 2 Euro, annualised the return would be over 100 percent. It is senseless though, as 2 Euro remain 2 Euro, annualised or not ;). As I had now another project in my portfolio I waited until it was sellable and tried to repeat. And voila, it sold this time for a premium of EUR 2.50 in less then a day. I pulled that one again, but with a premium of EUR 3.50. Of course it is not worth the hassle, but my play instinct awoke. I really hope this market situation does not last long as it prefers older investors over newer ones which is unfair. As I told you now about this possibilty I guess it will be over shortly anyway. As more people try this strategy, the lower prices should get, which would be fair.

Seling and purchasing is free at the moment, hopefully it stays like this. To be able to sell a project it needs the status as settled, then you can set the price by clicking sell. You need to confirm the sale by a code which you get delivered on your mobile phone.

Conclusion

I like Crowdestate more and more. I do hope that the supply of new loans increases, and of course we do not see big defaults. Follow me to Crowdestate’s registration.

Interview with Grid Wealth (Irish p2p)

Months ago I discovered Grid Finance and opened an investor’s account. Here and there I got a notification about new loans, usually in the range of 10 to 20k Euro. So far I haven’t invested, as the company representatives told me, they will not try to expand their p2p lending. I thought it would not make any sense to invest, although I really like the Irish p2p sector, due to my great experiences with Linked Finance and Flender. During the last few weeks I noticed an increased number of new loan notifications, so I thought maybe they changed their mind, but this is not the case. Nevertheless, I asked them some questions and got a nice reply from Andrea Linehan, the groups commercial director.

1) can you tell me when was grid business founded and by whom?

GRID was founded in 2013 by Derek F. Butler who is now GRID Chairman and CEO (https://www.linkedin.com/in/derekfbutler/)

2) how does business and wealth match together in one company?

GRID Business services the small business community in Ireland with funding solutions made up of one or more finance products. The capital for these finance products comes from a broad source of providers including institutional lenders, family offices and GRID Wealth’s retail lenders. GRID Wealth is a dedicated business unit representing and servicing retail lenders for our P2P product.

3) how many loans have you funded so far? How many delayd/defaults?

Default rate is at 0.25%

4) what are your goals for 2018?

We are adding additional finance products and capital providers to the platform so that we can service a wider range of businesses and with larger loan facilities.

5) who can invest with grid?

We work with national and international investors from institutional lenders, family offices, corporates and retail investors.

6) how do you separate from your irish competitors like linked finance/flender and one soon to enter player?

GRID gives Irish businesses access to a number of finance products fulfilled by a broad source of capital providers. While we do provide access to P2P as a finance product, it is only one part of a larger offering. We understand that the one-size-fits-all approach to finance does not work for Irish SMEs and a more bespoke designed solution is required to truly help a business to achieve their growth and expansion goals.

7) are there fees for investors?

Yes, investors pay fees also but each fee structure is different depending on the size of the funds, the product they are financing and the cost of their capital. The fees are deducted from the monthly payments, when received.

8) given my experiences with lending to irish business which are great, can you explain why irish borrowers mostly pay on time. What is the secret behind irish paying morale?

The very low default rate at GRID is due to a number of factors. Firstly, our credit model is exceptionally robust, meaning we only approve applicants that have a proven capacity to comfortably repay their loan. Secondly, despite when a proven capacity to repay has been demonstrated sometimes businesses get into difficulty. Our team work closely with our customers to help them navigate difficult times if they occur and offer advice on how to bring their repayments back up to date. Often times it is simple guidance on cash flow management that can lead to a loan performing again. Our experience is that business owners want to meet their obligations and having a supportive finance partner helps them to do this.

Thank you Andrea for your answers. What a pitty that Grid Finance is not trying to grow their p2p business. I believe there would still be room in Ireland to grow. Maybe they change their mind, if there will be more and more loan requests….