P2p Global Investments Share Discussion Threads

[wirralowl] 30/11/2016 10:12

P2PGI looks to UK loans after disappointing year:

[anley] 29/11/2016 13:18

Marshall Wace or (Wasted) the big USA hedge fund manager should organise a run off or slowly close down the fund but will the other city holders want to do this?

I wonder.............but I am a buyer and gambler!

[aroon001] 29/11/2016 12:08

I wish they wud just buy back the whole flippin thing.

If someone said to you hey you wanna buy some A-D credit rated loans for 3% a year return, no wonder the share price is where it is. Infact it shud be at 500 pence so that u get a 6% yield.

Well not all bad news. At least the manager is getting his "performance" fee.

In other news, the listed hedge fund I own that had reached a 13% discount has just offered to buy back all the shares at 4% discount. As it shud be doing. The ticker is BHMG LN if anyone wants to look.

[argoal] 29/11/2016 11:09

It is very hard to understand why the return is not better.

The published target default rate is 2-4%. If it much greater than this then they should come clean. Perhaps there is a large slice of delinquent/rearranged loans that are not yet in default but are not paying back much or anything?

Perhaps the securitisation only attracted 80% of face value for the loans packaged up?

What else is there that could be going wrong?

At least next month we should get 0.5% added to Nav for buybacks. They are at least more profitable than the loans.

[aroon001] 29/11/2016 10:29

Shocking.
12% underlying coupon. Leverages that up (debt to equity 90%), so should get about 20% yield on the underlying loans. But returns only 3% to shareholders. How does that make sense? Cash drag is minimal as only at 4% of portfolio.

[spectoacc] 29/11/2016 09:19

No comments this morning? Low returns continue: 3.7% annualised, which I assume includes running costs but clearly gets nowhere near covering the divi, which I suspect will have to go.

[rl34870] 28/11/2016 16:08

Even in 2008/2009 financial crisis credit card charge off rates (ie default) only reached 11%. So dont think 25% defaults is realistic. More likely that the market is anticipating much lower monthly returns than originally projected (caused by higher defaults over a sustained period).

[aroon001] 28/11/2016 15:56

The thing that doesn't make sense is how the average rates on loans are 11% if they only invest in grades A to D. Seems high.
The default rates may currently seem stable but this is a benign environment with full employment so shudnt expect anything less. Perhaps market is extrapolating some kind of recession ahead and thinking that 25% are going to default which seems super high. Then there is effectively a disconnect between the NAV which is just the loans marked at cost, and where the market is truly prepared to buy those loans (75 cents on the dollar perhaps). Though I not sure why the discount has got this big. In theory, if market really thinks 75% will default, then as old loans mature, P2P should be able to purchase new loans at 75 cents on the dollar, so the discount to NAV shudnt be this wide.
That previous citywire article stated that the way P2P and VSL run their business is different to the way other P2P funds do, hence the big discount to NAV, but it didn't clearly explain what those differences were I felt.

[rl34870] 28/11/2016 15:51

Looks like the market makers already know this months return is going to be poor as there has been no real selling pressure today.

[orinocor] 28/11/2016 15:15

Blimey the fall is picking up speed here. 745p ask now. Down 3.5% why?
It looks bad but the drop here over the last 2 months is just the same as in big utility stocks like SSE,PNN,UU.
Not the only sector suffering.

[anley] 28/11/2016 11:01

Good points and thank you for the post.

This is getting to a level where it could be classified as a big buy but as I have said before one needs to look at the monthly figures which are due shortly.

[rl34870] 28/11/2016 09:41

Lending Club publish comprehensive up to date quarterly statistics where you can see easily default rates in the various risk bindings. P2p invests in risk bandings A to D where the default rates are fairly stable so I think NAV can be trusted more than you suggest. Main problem is market sentiment which when very negative just widens the discount. The great paradox is that to get the three issuance off the ground sentiment had to be very positive. The ups and downs of animal spirits I suppose. At least they are persistent in their buybacks and seem to be pursuing this one rather than buying extra loans.

[aroon001] 24/11/2016 17:47

I'm wondering if its easier just to think of the share price forgetting about the NAV which doesn't update. And think of it more that the market thinks 23% of the debt that P2P own will default. ie the real NAV shud be closer to 77%. But its so hard to know where the secondary market for this stuff is.

In 2008 thru the crisis, Zopa had very low default rates so the model has been tested and seems to work, but admittedly bank of England cutting rates to zero helped out back then a lot. Which they cant do now.

[anley] 24/11/2016 12:04

The problem for the Hedge Funds is that the market is not very liquid and there own results are very poor so dealing has slowed a great deal at the moment.

[rl34870] 24/11/2016 10:00

If you look closely at the trades each day I think you will find that it is not buying and selling that is dictating prices but market makers algorithms. Last week VPC dropped to 70p bid, then had two massive sell orders at 70p and the next day the bid price rose to 72.5p. Things go on behind the scenes that we don't know about, we are trying to second guess all the time. One thing is for sure though, the market seems to take a very short term view of things. Presumably if it was such a bargain then the hedge funds would be in there.

[argoal] 24/11/2016 09:28

The discount is getting to insane levels now. Either there is something seriously wrong or this is a true bargain.

I fully support the buybacks at the moment. I think I worked out before that 250K shares bought back at 20% discount added 0.5% to Nav (someone may need to check this). So the buybacks in the last few days have added about 0.5p to Nav for this month.

They don't need to do much more each month to hit 7-8%+ increase in Nav annualised.

I bought when it first hit 15% discount so am about 10% down excluding dividends but will hang on as I can't see a rational reason for the extreme discount.

The relatively short duration of loans should allow them to adjust the risk profile of their loanbook if the economy take a major turn for the worst.

Not keen on securitising loans, mainly as I don't really understand the risks and benefits. Financial engineering seems to have a habit of going bad at the wrong time.

[aroon001] 23/11/2016 18:35

Yep as long as the interest on the borrowed money is less than the current dividend yield, this would increase future dividend yield. The main effect of buybacks at discount to NAV shud be to increase the NAV per share as per the effect you mentioned above I think.

I own shares in a hedge fund that has a clause that if the discount averages over 10% for 12 months, then management have to automatically take a vote on winding down the business. That would be ideal here.

[rl34870] 23/11/2016 17:25

I suppose it's more unusual to buy back shares with borrowed money rather than retained profits but if there are lesd shares in circulation then the dividend per share automatically increases.

[aroon001] 23/11/2016 17:13

Is that a response to one of my points? But yes I totally agree. Would much prefer them buying back shares than new debt. I suppose the manager wouldn't want to do it a lot as each time AUM decrease they get less management fee.

[rl34870] 23/11/2016 16:44

Aroon, presumably if you buy back 50000 shares at7.70 that are really worth 10.00 then you are effectively adding £115000 to the fund . It would take years to accrue this amount of interest from the cost of £385000 so presumably it makes no sense to keep buying loans when you can get this return from a buyback. Am I missing something?

[aroon001] 23/11/2016 16:39

Some interesting points in that article

1) the P2P trust sector is quite immature so perhaps its natural for there to be some scepticism (discounts to nav) whilst the sector establishes itself.

2) vehicles need to be structured as close ended funds - not sure I agree with this. I believe several property funds with illiquid assets trade as opened ended.

3) Says the approach by P2P ln and VSL are different to the rest which explains the discounts but not sure what the differences are? Mentions rising default rates but that should apply to all the sector.

4) Monthly performance has suffered due to a) drag of holding cash from fx hedging b) cash drag from securitisations. This is a plus for investors as these effects wear off.

5) Provisions for losses may be too low. 3.8% certainly sounds low to me especially over an economic cycle rather than just now. Also some of the debt purchased may be from consumers consolidating other debt but would have thought that their credit files are available and an appropriate interest rate charged in the first place to reflect this.

Does anyone know why P2P LN engages in securitisations as part of their business model? and why its model and VSL is different to others?

[orinocor] 22/11/2016 18:07

hxxp://citywire.co.uk/money/the-growing-pains-of-high-yielding-p2p-trusts/a955188

[aroon001] 22/11/2016 17:20

Bottomless pit.

The manager wont answer questions from retail investors unfortunately.
They shud introduce a hurdle rate of 6% before the manager gets any performance fee. I mean why shud they get paid extra for performing at 4% a year, esp when the underlying loans are yielding 11%.

When share buy backs end this thing will have no bid!