Goodbye from the Secret Investor

After 4 years of doing the P2P Lending Blog for Choice Loans, it is time to move on to pastures new. The gravitation towards passive investor friendly auto-investing and the reduction in the appeal of individual loans that are listed (possibly due to bad experiences in the past increasing my scepticism) has led me to switch focus to other projects and schemes.

Given that P2P investments are so illiquid, it will be some years before I know for certain how well things have gone. On paper, it looks good but capital equivalent to 2-thirds of my profits from when I began early in 2015 are tied up in long overdue property loans on Funding Secure and I have doubts as to whether a significant proportion of that will be repaid – especially as the platform has gone into administration this week.

In hindsight, the introduction of the IFISA and my decision to choose Funding Secure as the home of a large chunk of my tax-free savings proved to be my biggest mistake as it led me to having more money on that platform than there were loans to allocate it to in small enough portions not to break the golden rule of P2P lending which is to spread the risk and don't have too many eggs in one basket.

I looked to mitigate against this by attempting to sell the loans I had over-committed to on the secondary market before they were due to mature however as confidence in the platform eroded, as the downward slide began, it became impossible to find buyers and I had no escape from many property deals that turned out to be decidedly iffy – particular as the previous regime on the platform used some very optimistic valuations when setting LTVs.

Now the platform has gone into administration, who knows what will happen to my funds…

If Funding Secure proved to be a disaster, at least I am pleased with the decision I made to exit Funding Circle in the Autumn of 2017 when defaults were rising and the platform removed the ability to self-select loans. I got out with my profits still intact whereas many who remained have suffered losses.

For an active investor such as myself, Funding Circle presented the greatest selection of loans to choose from but since the platform became AutoBid only, Lending Crowd took up their mantle providing a couple of new loans to review each day although that supply seems to have dried up recently. I don't know whether that is because they are employing more stringent credit checking criteria or because banks/institutions are increasing their appetite for lending leaving fewer borrowers for retail customers to invest in via P2P platforms.

This lack of throughput on Lending Crowd is forcing me to reduce my holdings with them – especially as most of the loans that are listed I don't find very tempting.

Aside from moving funds out of P2P all together, I have been joining the ranks of passive investors and investing in the longer-term accounts of Assetz Capital and Ratesetter. Where once I was using the "skill and judgement" that I thought I possessed to chase double digit returns, the experiences of the past few years means Provision Fund protected interest rates in the range of 5 – 6% pa on these two sites have a much greater attraction.