In part two of the European lending market series, we review the lending environment of the 3rd largest economy in Europe, France. The French legislative reforms have been particularly progressive toward peer-to-peer lending, with specific acts relating to crowdfunding. However, as we examine, they are fairly restrictive with significant barriers to entry, particularly for consumer lending.

French peer-to-peer lending volumes have grown steadily since 2016, with property lending being the fastest area of growth in 2017-2018 (57.3%). The total market is roughly half the size of the German peer-to-peer market (€1bn) and pales in comparison compared to the UK market (£6.4bn).

The overall French lending market, which includes a very small proportion of P2P lending, has grown since 2016. New originations of business and consumer loans in France grew 9.9% and 6.8% (annualised) respectively in 2018.

The ECB dropped the base rate to 0.0% in March 2016 which triggered French homeowners to renegotiate their mortgage to more favourable terms. Following this period of renegotiation new lending has dropped significantly, normalising in 2018.

Legal Crowdfunding

France were early adopters of crowdfunding regulation, with a specific legal framework in place since October 2014. The regulation specific to crowdfunding does not provide any EU passport possibilities so French platforms wishing to operate elsewhere in the EU must either apply locally, or passport through permissions which are ‘passportable’ (see below).

The legislation created two distinct types of participants:

1. Conseillers en investissements participatifs (CIP) - crowdfunding advisors

CIP’s can offer shares, or bonds (typically issued as “minibonds”) of up to €8m per issuer per year. The minibonds must have a maximum repayment date of five years with instalments at least once per quarter. An important factor that reduces friction for the borrower is that no prospectus is required, just key facts.

1. Intermédiaires en financement participatif (IFP) - crowdfunding intermediaries

IFP’s can offer straight loans (typically how business P2P loans are conducted), donations, or rewards.

A big sticking point in the consumer P2P loan space is that only financial professional individuals can borrow. On the lender side, a single individual may not lend more than €2,000 per project.

Authorised Credit Institutions

With the legislation being so prohibitive to consumer lending, the only reasonable way a P2P firm can lend to consumers is by setting up as an authorised credit institution. This is a costly and regulatory cumbersome process, but it does come with the benefit of being able to “passport” into other EU countries.

French P2P Lenders

A number of online lending platforms offer opportunities to both institutional and retail investors.

France P2P Platforms with over €10m in Origination (2018)

CIP and IFP operators must describe loans as projects and are offered to investors on an individual basis (self-select). Younited Credit (a credit institution), offer investment in loans in the form of an alternative investment fund.

Historical returns tend to be stronger for property lenders who have seen between 9-10.3%. Younited Credit fund returns were 2.11% in 2018, in line with previous years back to 2015. The largest business lender October are advertising returns of 3.9%.

French Bankers

The majority of lending in France is conducted by an oligopoly of upto 8 big banks and hundreds of significantly smaller credit institutions.

Bank consolidation is apparent in the numbers, as seen by the substantial reduction in credit institutions in the graph below.

No Pain, No Gain

The main threat to Frances €2.3tn economy is their relatively high unemployment rate of 8.6%, in comparison to their British (3.8%) and German (3.1%) neighbours. This has steadily decreased from 10.0% at the start of 2017 as a result of the French president Emmanuel Macron’s reforms, of which unemployment is at the centre of policy. Macron immediately implemented a series of reforms to reduce labour market rigidities and incentivise low-wage work with tax reductions. Macron targets 7% unemployment by 2022.

GDP has grown by 1.2% (UK 1.0%) and house prices are up 3.2% (UK 0.9%) in the past year.

Conclusion

Lending in France is typically done by traditional banks with P2P platforms yet to have a major impact. There are opportunities for investors, particularly in the property segment of the French peer-to-peer lending, with returns up to ~10%.

While progressive of France to have specific crowdfunding regulation in place, the laws themselves are fairly restrictive which has potentially resulted in a relatively small market. The barriers to entry for consumer platforms are high for both the borrower and lender and the lack of automated investment in business loans is less desirable for all investors.

This article was written by Rupert Elder and edited by Iain Niblock.

As we expand our reach across European jurisdictions, we are reviewing the current alternative lending markets in various European countries. Germany has the largest population and GDP in Europe, but it’s not regarded as an alternative lending hotspot. This blog is set to provide context to the lending markets in Germany as well as demonstrate the opportunities available to investors in this market.

As seen in the chart below, peer-to-peer lending in Germany has seen volumes almost double each year since 2016 to just over €1bn. Although €1bn is a considerable volume, origination is low compared to the UK, the largest market in Europe, where 2018 volumes reached £6.4bn (Alt-fi).

As shown in the chart below, total loans in Germany (excluding credit cards, overdrafts, and revolving loans) in 2018 were €1,236bn. The €1bn of P2P lending therefore equates to roughly 0.08% of the total lending market.

The relatively low lending volumes and penetration into the lending market can in part be pinpointed on the regulatory environment in Germany. Only banks and specialist closed ended alternative investment funds are permitted to issue loans in Germany, resulting in peer-to-peer lenders having to engage in convoluted legal and financial partnerships with the traditional banks. Although the regulator has not provided a framework for the industry to foster, the rise of so-called “challenger banks” such as Bunq, N26, ComDirect, 1822Direkt, and DKB may give an avenue to more efficient partnerships with P2P platforms and lead to greater fintech innovation. A lender referral partnership has been developed by Auxmoney and N26, as an early example.

German P2P Lenders

There are opportunities for investors to access risk adjusted returns offered by alternative lending platforms.

Germany P2P Platforms with over €10m in Origination (2018)

Similar to the UK market there are a number of different investment options for investors, some lending platforms, such as CreditShelf or Exporo, offer the ability to select individual loans, while others such as Funding Circle and Auxmoney offer auto-bidding functionality.  Both retail and institutional investors are active on the marketplaces.

It should be strongly noted that advertised indicative returns from the platforms may not necessarily translate to reality. The returns provided by the P2P platforms in Germany are generally gross, therefore do not account for defaults or cash positions. On a net IRR basis, the returns are likely to be significantly less.

Investors should be cautious when considering property lending which accounts for 27% of the peer to peer sector in Germany. Across the majority of the large property lenders, Exporo, Zinsland and E&V Capital lending is on a subordinated basis. In the event of default, the primary lender, generally the bank, will be paid first followed by the investors on the platform. This leads to lower recovery rates.

The P2P consumer lender, Auxmoney is significantly larger than any other P2P lending platform in Germany and accounts for approximately 0.5% of the entire consumer lending market. With their large database of customers (over 100,000 loans made) and years (founded 2007) of developing credit models, it will be of interest to see how they perform in the SME space, which they joined in April 2019.

Invoice Finance provider Billie which was launched by the founders of Zencap (Acquired by Funding Circle in 2016) also offers opportunities to investors.

Leaving a Mark on Deutsche Banking

If P2P platforms, or other direct lenders are not doing the lending, it’s worth taking a look at the wider market to investigate if this market is likely to grow. The German banking system, in part government owned, is being drastically consolidated. In particular, the regionalised savings banks and co-operatives of old who typically lend to consumers and small businesses are being acquired, merged, or replaced.

But the net amount of lending in Germany remains positive – there is clear demand for loans, and indeed the ability to take on new loans. Both household and private sector debt-to-GDP are among the lowest in Europe at 54% and 148% respectively (compared with 87% and 224% of the UK), implying that culturally Germany is not a nation of borrowers.

The P2P platforms position themselves as a much more convenient alternative. An online only process gives offers or rejections within hours, compared to the arduous hoops the traditional lenders require borrowers to jump through. Similar to other European regions, there might be opportunities for this market to grow if there are underserved markets.

Economic Environment

The German lending market feels like it should be fairly stable, but digging into the economic data we can see that the economy is fairly flat. 1% GDP growth in the past year has not been stimulated by the 0% base rate the ECB has held in place since 2016. A yield curve close to inversion points toward a possible recession in the coming years. It isn’t all bad news for German investors though, unemployment at 3.1%, booming house prices (5.2% growth last year) and a reducing volume of business insolvencies (down 3.9% from 2017 to 2018) all point toward a reasonably strong credit environment.

Conclusion

For institutional investors, there are a number of lending platforms where origination can be sought and the macro credit environment is relatively strong, albeit the economy is fairly stagnant and a recession might be on the horizon. The gross returns on offer aren’t the most exciting across Europe, especially once you consider that defaults aren’t included in these numbers, but the opportunity to invest in Europe’s largest economy does come with its own governance and diversification benefits.

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We are delighted to announce the launch of the Orca ISA which is now available to both current and new customers. The Orca ISA is unique as it allows investors to invest across multiple peer to peer lending (P2P) platforms, all from the one tax efficient Innovative Finance ISA. It’s now simple and efficient to invest in a diversified P2P portfolio within an ISA.

We are eager to make P2P investing more accessible, easier and safer. Investors can earn inflation beating returns without the volatility of the stock market if they chose the correct P2P platforms and diversify across the market. Our aim is to make this process as simple as possible so more people can benefit from the returns on offer.

What else is new?

As part of our eagerness to make P2P more accessible we’ve reduced our minimum investment to £100 and removed any fees until April 2020.

In response to customer feedback we have also introduced an additional lower risk investment portfolio. Orca Pure offers investors a return of 4.3%, while Orca Plus offers slightly more risk for a return of 5.3%. Both Orca Pure and Orca Plus comprise of P2P investments across five of the leading UK P2P platforms.

Key features of the Orca ISA

• A diversified P2P portfolio in a single, tax-free ISA wrapper
• Access to 5 of the top P2P platforms: Lending Works, Assetz Capital, Landbay, Octopus Choice and Lending Crowd – a mix of consumer, business and property loans
• Get started with a £100 minimum investment
• Orca performs due diligence on the P2P market and offers ‘ready to invest’ diversified portfolios
• Two choices, Orca Pure (4.3% return) and Orca Plus (5.3% return)
• Standardised investment reporting from the Orca online platform

Opening an Orca ISA

For new investors it’s really simple to get started, click the register button below and complete the sign-up form. It should take roughly 5 mins.

Open an Account

Current investors can convert their account to an IFISA by logging into their dashboard and clicking on the ‘Open an IFISA’. The process of converting an IFISA can be found here.

Please get in touch via the live chat on our website or by emailing info@orcamoney.com if you have any questions. As always, we are always looking for feedback so please drop us a note if you have any comments.

Account Details

Products

Octopus Portfolio

This product automatically splits an investor's capital across multiple property loans, typically 2 years in term. Investors can auto re-lend interest payments to borrowers on the platform or take repayments as income. Capital is redeemed at loan maturity or loans can be sold early on the secondary market.

Financial Summary

Overview

Octopus Choice (Octopus) is a peer to peer lending platform where investors can lend money to property borrowers, typically seeking buy-to-let (BTL) loans. All loans are secured on a 1st charge over physical assets, typically residential property but also commercial property. Octopus pre-funds loans before passing them on to new investors on the platform, and they also invest in up to 5% of each loan in a ‘first loss’ position (riskiest portion of the loan). The target rate of return is 4% per annum, however, each loan an investor holds in their portfolio will have its own personal rate, therefore actual returns can vary. The platform’s ultimate parent company is Octopus Capital Ltd (the Group), which builds products and services for the intermediary market and has over £8bn worth of assets under management.

Risk and Security

A primary risk is market concentration risk. Loans are made into the UK property market, therefore if the property market took a significant downturn, this may impact investors’ portfolios negatively should defaults increase. To mitigate this risk, Octopus secures all loans with a 1st legal charge over physical assets. They also lend at conservative loan-to-value (LTV) ratios, never exceeding 76%, meaning the asset securing the loan would need to drop in value by 25% before investor’s are exposed to potential losses. To further combat this risk, Octopus invests in 5% of each loan, in the riskiest portion, and will forego its returns and capital before any investor loses funds. Investor portfolios are typically diversified across 10-60 loans.

Recovery Process

In the event of a default, Octopus Choice can step in and recover the assets. If a loan is in default, it has suffered more than two months of missed payments or has exceeded the loan term. In this instance, the loan is passed on to the Security Trustee in order to recover the debt from the sale of the property underwriting the loan.

Withdrawing Funds

Octopus operates a secondary market where investors can buy and sell loans, thereby returning cash early before the loan term matures (when capital is returned). Octopus may also buyback loan parts to ensure capital is returned quickly. This is not guaranteed, and the time it takes to sell on the secondary market is subject to the liquidity of the platform at the time.

Platform Failure

In the event of insolvency, Octopus Choice has a fully funded wind-down in place to run off the loan book should the company (Octopus Co-Lend Ltd) become insolvent. Loan contracts exist between investors and borrowers, therefore loans should continue to be serviced.

Account Details

Products

Secured & Insured

Investors lend to creditworthy businesses and have their capital secured on an all-asset charge over the business borrowing and, additionally, against the Accounts Receivable (AR) of the business, which are insured.

Secured & Assigned

Investors lend to creditworthy businesses and have their capital secured on an all-asset charge over the business borrowing, and, additionally, against the future contracted revenue of the business, where ArchOver is assigned control of these contracts.

Financial Summary

While ArchOver is not operating in profit, the company’s most recently filed accounts displayed growth in the key performance indicators, as set by the company’s directors. Namely, doubling revenue and more than tripling the investor base in little over a year. ArchOver is a subsidiary of Hampden Group, the platform’s majority shareholder.

Overview

ArchOver is a peer to peer lending platform where investors can lend money to established businesses, typically seeking working capital. All loans are secured on an all-asset charge over the business borrowing funds, and additional security is taken in the form of either a business’s Accounts Receivable which are insured, or on the recurring revenue of the business. The security package depends on the loan selected. The P2P platform’s parent company is Hampden Group.

Risk and Security

As investors are required to manually select borrowers, their exposure could be limited, meaning a default poses a significant risk. All loans are protected by two tiers of security. For Secured & Insured loans, investors’ capital is secured on an all-asset charge over the business and, additionally, against named Accounts Receivable (AR), where the ARs are insured. For Secured & Assigned loans, investors’ capital is secured on an all-asset charge over the business and, additionally, against the future contracted revenue of the business.

Recovery Process

In the event of a default, ArchOver can step in and recover the assets. For any ARs not recoverable under a Secured & Insured loan, ArchOver will call upon the insurance. With Secured & Assigned loans, ArchOver owns the contracts (guaranteed revenue) which are taken as security and can dispose of them if a default occurs.

Withdrawing Funds

ArchOver does not currently operate a secondary market allowing investors to buy and sell loan commitments. Investors should be prepared to hold their loans to term.

Platform Failure

In the event of insolvency, ArchOver’s parent company, Hampden Group, is contractually bound to step in and continue servicing loans. Hampden is a leading provider of management and support services to the insurance market, and has been in operation for over 30 years. Hampden invests in ArchOver, and also invests in borrowers across the platform. Hampden has several subsidiaries and manages in excess of £2bn of insurance assets. For more, read Orca’s ArchOver review.

Account Details

Products

Growth Account

With the Growth Account, capital is spread across 20 different loans through the LendingCrowd Loan Market. No more than 5% of an investor's funds will be invested in any one loan. All repayments will be automatically reinvested.

Income Account

With the Income Account, capital is spread across all the loans available on the Loan Market. Interest payments will be transferred to a separate account to be withdrawn, while capital repayments will be automatically reinvested in new loans.

Self-Select Account

With the Self-Select Account, investors are required to manually select the loans they wish to invest in. Investors can buy and sell loans on the LendingCrowd Loan Market.

Overview

LendingCrowd is a peer to peer lending platform that connects investors with UK SME business borrowers. Launched in 2014, the P2P platform is the only Scottish recognised P2P lender. It was one of the earliest platforms to offer the Innovative Finance ISA.

Risk and Security

The principal risk is a large number of borrowers default on their loan commitments. This may be a result of economic conditions or a reflection of LendingCrowd’s credit sanctioning. Diversification is the primary security measure offered by LendingCrowd. Investors in the Growth and ISA accounts will have their capital diversified across multiple loans, reducing the risk of a default impacting their overall investment. For investors in the Self Select account, they are responsible for selecting loans and, ultimately, their exposure levels.

Recovery Process

When a loan falls into default and there appears to be no clear indication of how and when the payment will be received, recovery action will be taken. This will include reference to LendingCrowd’s Panel of Experts which includes solicitors, accountants and debt collectors who will provide guidance or act on the platform’s behalf to recover as much capital as possible.

Withdrawing Funds

Investors can withdraw funds by selling their investments on the LendingCrowd Loan Market. There’s a fee for all withdrawals and the fee depends on the account selected. The time taken to access funds depends on how quickly an investor’s holdings can be sold and relies on new investors substituting the loan commitment.

Platform Failure

If LendingCrowd ceases trading, a third party service provider will step in and continue servicing loan repayments. LendingCrowd has appointed Nostrum Group as its standby servicing partner. All client funds are held in a separate Barclays Client Bank.

Account Details

Products

3 Year

This product automatically splits an investor's capital across multiple consumer loans of upto 3 years in term. They can auto re-lend their repayments to new borrowers on the platform or take repayments as income.

5 Year

This product automatically splits an investor's capital across multiple consumer loans of upto 5 years in term. They can auto re-lend their repayments to new borrowers on the platform or take repayments as income.

Overview

Lending Works is a peer to peer lending platform that connects investors with UK consumers seeking personal loans. Investors automatically diversify their capital across multiple borrowers when they lend through the platform, they cannot manually select loans.

Risk and Security

The principal risk is a large number of borrowers default. The Lending Works ‘Shield’ protects investors from missed repayments through a combination of diversification, insurance and a provision fund. The maximum exposure a lender will have to a single borrower is 5%, ensuring healthy diversification across loans. The provision fund is maintained at a sufficient level to cover expected arrears and defaults. The other tier of protection in the Shield comes in the form of insurance, which is backed by three A and B-rated UK insurers.

Recovery Process

If a borrower is late in making a repayment, the Lending Works Shield will cover the payment, while the recovery process commences. Lending Works will make initial contact with the borrower and if the borrower still fails to pay, a third party debt collector will take steps to recover the debt.

Withdrawing Funds

To withdraw funds early, investors must sell their loan parts to other investors on the Lending Works secondary market. Lending Works charges 0.6% or £20 (whichever is greater) to sell any loan commitments on the secondary market. Additional charges may apply if there’s an ‘interest rate shortfall’ between current rate on sale and the rate expected by the substitute investor.

Platform Failure

In the event of insolvency, Lending Works has an arrangement with a back-up services provider who would step in to manage the remaining loan agreements to maturity and ensure that all loan repayments continue to be made to investors as planned. Any funds sitting in cash are held in a segregated client account and can be transferred to the investor at any point.

Account Details

Products

ThinCats Loan Market

Investors manually select the loans they wish to invest in. All loans are asset-backed and credit rated by ThinCats. Investors lend to corporate businesses across multiple industry sectors and regions in the UK. ThinCats Secondary Market enables the buy and sell of loans. There is a charge for successful loan sales.

Financial Summary

December 2016 figures account for 7 months from May to December 31st. Year ended 31st May 2016 figures are also displayed. ThinCats is a subsidiary of ESF Capital Limited; the ‘Group’ invests in ThinCats and ensures adequate resources are provided to enable ThinCats to achieve its objectives.

Overview

ThinCats (trading name of Business Loans Network Ltd) is a peer to peer lending platform that connects investors with UK businesses and launched in 2010. Investors are required to manually select the loans they wish to invest in, gaining exposure to corporate businesses across multiple industries and regions in the UK. Specialist ‘Sponsor’ ESF Capital helps evaluate, approve and underwrite borrowers on the ThinCats’ platform.

Risk and Security

The principal risk is borrower default. As investors are required to manually select loans, their exposure may be very limited. This means a default could significantly impact their overall investment. All loans are secured against realisable assets that can be liquidated in the event of a loan default. ThinCats applies a Credit and Security grading to each business, demonstrating the likelihood of default and level of security coverage.

Recovery Process

In the event of a default or the business entering into insolvency, ThinCats will engage independent professional advisors such as property and chattel asset agents, solicitors, reporting accountants and insolvency practitioners. The recoveries process is dependent on the complexity of the situation which may result in it taking longer to recover the assets and return funds to investors.

Withdrawing Funds

Investors who wish to transfer uncommitted funds can send ThinCats a withdrawal request through the ThinCats system and funds should be returned within 3 working days. Investors can sell loan parts on the ThinCats Secondary Market for a 1% fee of the capital outstanding on the loan part. The ability to sell loan parts is dependent on new investors substituting the loan commitment, which is not guaranteed. Some loans are not eligible to be sold on the Secondary Market, such as Community Chest Loans which are unsecured. Investors should take this into consideration when investing.

Platform Failure

If ThinCats were to become insolvent, plans are in place to ensure loan repayments continue unaffected. ThinCats maintains a Clients Money Resolution Plan which exist to support an insolvency practitioner in such an event.

This is a guest post from Growth Street, a peer to peer business lender which recently secured funding in excess of £7 million to scale its operation. Growth Street facilitates 30-day loans and automatically spreads investor’s capital across multiple borrowers.

Regardless of your opinion on Britain’s membership of the European Union, one thing most people are unlikely to dispute is the existing state of uncertainty that the UK finds itself in.

And in few places has the effect been felt so strongly as the stock market. The FTSE 100 kicked off 2019 down 1.6% after a year that saw the biggest annual decline since the 2008 financial crisis.

It may have left you thinking about how your P2P portfolio is balanced, too. A few questions might be occupying you at this time of the year: Am I adequately diversified? Am I satisfied with the returns I’m getting? And am I happy with the amount of risk I am taking?

One option could be to save with your high-street bank, which could offer guarantees on funds held in bank accounts of up to £85,000 as part of the Financial Services Compensation Scheme (FSCS). In recent years, P2P investing has been a useful avenue for investors happy to take more risk in order to make their hard-earned money work a little harder.

But, in these uncertain times, P2P investors may wonder whether they can continue to benefit. Could P2P lending secured against assets be the answer?

What is secured P2P lending?

A secured loan involves money being lent to a borrower with a proviso that, if they’re unable to repay, the lender can recover and sell certain assets, which can then be used to pay part or all of any debt owed.

A common example of secured lending within P2P is property-backed lending, where loans are secured against a property. This security can help to mitigate the risk to investors, and potentially makes property-backed lending an attractive proposition for those not keen on investing in unsecured loans.

Invest in secured lending without exposure to property

Even though secured loans might seem less risky to investors, some individuals may wish to pick investments that aren’t exclusively secured against property.

There are other ways for P2P investors to look to target a return from secured loans. Some business-focused P2P platforms, like Growth Street, secure loans against borrowers’ assets and can also accept personal guarantees from the business’s directors.

When applying for a secured loan, then, a prospective borrower might be asked to provide security over all its assets, which will include stock the business already owns, and physical assets such as machinery and other equipment. This would mean that in the event of a default, the P2P platform facilitating the loan would potentially be able to recoup some or all of the money lent to the business. This wouldn’t necessarily be the case with unsecured loans.

Incorporating secured lending into your portfolio

With uncertainty affecting established investment classes like stocks and property, we think P2P lending secured against business assets could have an important role to play in investors’ portfolios through 2019.

Remember though, secured P2P investing still comes with risk. In the unfortunate event of a default, there’s still no guarantee investors will get any money back from their investment: capital is definitely still at risk. It’s also important to bear in mind that P2P lending – unlike the bank accounts we mentioned earlier – is not covered by the FSCS, so your capital is not protected.

Visit Growth Street

So, have you taken into account how uncertainty could affect your portfolio in 2019? With the P2P industry continuing to grow at a rapid pace, maybe it’s time to consider secured P2P loans as a solution.

Alex Davies

Investor Relations

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Your capital is at risk if you lend to businesses. Peer to peer lending is not covered by the Financial Services Compensation Scheme.

Growth Street Exchange Limited (company no. 09495712) is authorised and regulated by the Financial Conduct Authority (FRN 739318). Our registered office is 5 Young Street, London W8 5EH.

Still getting used to being back at work? Already given up the new year’s resolutions? Settling in to the new year is never easy. This is why some peer to peer lenders are helping smooth the transition with great cashback offers. Find out more about LendingCrowd and Assetz Capital cashback offers below.

You can invest directly with these platforms or you can invest with Orca and benefit from the offers while diversifying across multiple major lenders, with minimal effort required.

IMPORTANT: You must be a new investor at the platforms to qualify for their offers. If you choose to invest with Orca in order to redeem an offer, but are an existing Orca customer, you will not qualify for the Assetz Capital offer. If you are an Orca customer who does not hold LendingCrowd in your Orca portfolio, you may qualify (details below).

LendingCrowd Cashback Offer

LendingCrowd is offering new investors the chance to maximise returns with a cashback offer.

You can visit LendingCrowd directly or invest with Orca and we’ll add the P2P business lender to your Orca portfolio.

If you choose to invest with LendingCrowd directly, here are the details of the offer:

If you choose to invest with Orca, here’s what to do:

To claim £100 cashback, invest £15,000 - £29,000 with Orca.

To claim £200 cashback, invest £30,000 - £58,000 with Orca.

To claim £400 cashback, invest £59,000 or more with Orca.

Investing with Orca requires you to invest more than the qualifying amounts in the table above, as your funds will be allocated to 4 other P2P lenders in addition to LendingCrowd.

If you are an existing Orca customer and top up your Orca Account to £15,000 or more, you will qualify for a LendingCrowd cashback offer.

Assetz Capital Cashback Offer – ends January 31^st

Assetz Capital is starting off the new year with a similar cashback offer for new investors, but for a limited time only. This offer ends at midnight on 31^st January.

Again, you can invest with Orca (see below) or visit Assetz Capital directly.

Here’s where it gets interesting…

If you invest with Orca before the end of January, depositing an amount listed below, you will receive combined cashback offers.

IMPORTANT REMINDER: The table above relates to new customers only.

Existing Orca customers will not qualify for the Assetz Capital offer. New Orca customers will qualify if the criteria are met.

Register Orca Account

Please get in touch if you have any questions info@orcamoney.com. If you want to hear more about our exciting new product launches, including the Orca ISA, click Orca ISA & Self Select Portfolio details.

2018 has been a big year for Orca. We launched the Orca Investment Platform, secured another funding round, and expanded the business in personnel and location. Not to mention, plans have been put in place for the launch of the Orca ISA and the ‘Self-Select’ portfolio builder, a complementary product to the existing ‘Model’ portfolio.Here is our 2018 timeline of significant milestones.

February 2018 – Orca Investment Platform Launches

In February, we launched the Orca Investment Platform, an aggregator which integrates with multiple major peer to peer lenders, enabling investors to spread their capital and risk across platforms, sectors, and borrowers.

This was a landmark moment for Orca. Years had been spent building up to this point and a tremendous amount of effort had been invested by many, many people. Special thanks to those who supported us, you know who you are.

September 2018 – Seedrs Equity Crowdfunding Campaign

We ran our first ever equity crowdfunding campaign. Using the Seedrs platform and admittedly unsure of how successful the campaign would be, we were delighted to exceed our £500,000 target in under two days!

With more than 400 investors, spanning dozens of countries, the response from the crowd – including Orca users – has been an especially rewarding feature of the year.

December 2018 – Orca Secures Over £500,000 in Equity Funding

Following the close of the Seedrs campaign, and with contribution from venture capital funds, angel investor networks and private investors, Orca secured £574,280.

The funds will contribute to Orca’s development and growth plans for 2019.

Now, 2019, here’s the big pitch…

Q1 2019 – Orca ISA

The Orca ISA will be a first of its kind in the market where investors can build their own portfolio and hold it in an ISA. Current ISA rules stipulate that people can divide their tax-year ISA allowance of £20,000 between ISA (e.g, Cash, Stocks & Shares and Innovative Finance ISA) accounts however they wish. But, they may only subscribe current tax-year subscriptions to a single IF ISA each year. This means it is very difficult to build a diversified P2P portfolio which is wrapped in an ISA. Investors typically hold one P2P investment within an IF ISA, while the remaining P2P investments are held in taxable general investment accounts.

With the Orca ISA, investors can hold multiple P2P providers in a single IF ISA. Here are the key benefits:

• Invest in the Orca Model portfolio suitable for hands-off investors or Orca’s Self-Select portfolio for the more active investor
• Earn interest up to 6.5%
• Earn returns tax-free
• Diversify ISA money across multiple P2P providers
• Transfer old ISA money
• Invest ISA money at non-ISA P2P providers

We are already building a Wait List of investors eagerly awaiting the launch of the ISA.

Join the Wait List

Q1 2019 – Self-Select Portfolio Builder

In addition to the launch of the Orca ISA, we are also launching a new product to complement the existing Model portfolio product.

The Self-Select portfolio builder allows investors to implement their own strategies, selecting only the P2P providers and products they wish to hold in their portfolio. What’s more, investors can build their portfolio and hold it in the Orca ISA.

2019 – Integrate New Lenders

Throughout 2019 we’ll be seeking to introduce new lenders to the aggregator, offering investors greater choice and diversification. Updates on this will come in the new year.

2019 – On-board EU Investors

We are investigating how we can on-board EU investors, something which we believe will stimulate growth in the UK P2P market and offer EU investors a simple access-point to UK P2P lending.

Read about our upcoming product launches by clicking below

Find Out More

Finally, a special thanks to everyone who has invested with Orca, your support is very much appreciated; the value early adopters offer businesses is immeasurable and helps shape future product iterations, so thank you from the entire Orca Team. Have a fantastic 2019!

We interviewed Brickowner's CEO, Frederick Bristol, to find out more about this growing 'property investment platform'. Launched last year, Brickowner facilitates investment in asset-backed property loans. They recently closed an equity funding round on Seedrs and have big plans for 2019.

Can you provide an overview of Brickowner?

Brickowner is a property investment platform that provides access to exclusive, professionally managed property investments from £100 via a straightforward, no-nonsense format. We aim to curate the best property investments and make them accessible to everyone.

Why did you start Brickowner and what was your biggest challenge in launching the platform?

I worked in property for 15 years, before founding Brickowner. I saw the difficulties that many developers had in securing, managing and structuring funding while also witnessing many investors missing out on many investment opportunities due to high minimum thresholds and a lack of accessibility. By solving these two problems, our platform changes this. With a background in property, I had to rely heavily on my team to help build and test the technology of the platform, to ensure we delivered a market-leading site that supported both property investment managers and their investors.

What type of investments should investors expect to find on the Brickowner platform?

Property investments form a large market. The private rental sector is worth over £1.29 trillion; with our platform covering this and all other UK property markets we can source the best opportunities from a large pool of potential investments. We aim to offer both equity and lending opportunities across different property sectors like residential, hotel, industrial, student housing, and even cemetery investments.

No two properties are the same, and this is reflected in the investments. Being able to draw on our experience in property, we can ensure that every investment that makes it onto the platform weighs up an acceptable level of risk against the projected ROI. We aim to access target returns from property loans of 8% plus, and on equity investments of 20% plus.

Can you describe the investment structure and how this is linked to the underlying assets?

At Brickowner we currently have two types of investments,: equity and debt.

For equity investments, investors own a share of the property and can receive a return from rent, adding value and onward sale.

For property loans, investors lend while using the property as security, in a similar way to how banks issue mortgages. How an investment is structured depends upon the specifics of that particular investment; we ensure each one gives our investors the best possible terms.

What separates Brickowner from its competitors and why should investors sign up to the platform?

At Brickowner we put our investors first by being highly selective about the quality of the investments we offer. We ensure our platform is easy to use while securing exclusive investments. Where else could you invest in a holiday let development, hotel and cemetery, all from behind your laptop? All our investments are 100% asset-backed, and by doing the hard work, we take the hassle out of investing. No other platform does this.

Congratulations on closing a recent investment round on the Seedrs platform. Can you reveal any future product updates?

Over 2019 we plan to offer an auto-invest feature to allow our users to diversify their portfolios automatically. A secondary market will allow investors to sell their investment before the projected term. We are also looking to offer a number of bonds to enable our investors to hedge against the uncertainty posed by Brexit. Moreover, we plan to innovate further with other new investment opportunities that I hope will be firsts in the UK PropTech sector.

Thanks to Frederick for taking the time to speak with Orca.

Despite only recently entering the peer to peer lending (P2P) market, easyMoney is a lender which most will immediately feel familiar with – easyMoney is part of easyGroup, famous for its airline, easyJet. Now offering a P2P platform, the easyGroup is extending its repertoire, providing investors with exposure to asset-backed property loans, typically bridging finance, returning 4.05% – 12% per annum (p.a).

In this review, we assess the easyMoney product after having invested funds across the platform.

easyMoney Key Details

How it Works

easyMoney offers an auto-lend/auto-bid product, where capital is spread across a portfolio of property loans. Investors are not required to select the loans they invest in, however professional investors do have the option of ‘automatic diversification’ or a more tailored, ‘bespoke’ service.

The amount invested determines the product, and therefore the return.

Deploying Funds

We ran a test, investing £500 across the platform. Once signed up and funds deposited, the £500 was lent out approximately one week later.

The time it takes to deploy funds is a key consideration. The longer funds remain un-lent, the longer capital is sitting idle not earning interest. For a new platform like easyMoney, this could be even more of a concern. In saying that, funds were deployed in roughly one week, which is reasonable.

Diversification

easyMoney aims to diversify funds across multiple loans. They do this by selling a portion of an investor’s portfolio and re-investing into new loans on the platform.

Initially, the portfolio will likely be concentrated on a small number of loans. Diversification can therefore take months to achieve if, for example, an investor was seeking 10-20% exposure to a single loan.

In the test we conducted, we were allocated a single loan at the point of funds being invested. After approximately three weeks, two new loans were introduced to the portfolio; the principal £500 investment was split across three loans.

Security

All loans are asset secured. The loan-to-value (LTV) ratios for the specific loan type can be viewed in the table below:

In the event of default, easyMoney can step in and repossess the security, repaying investors out of the sale of the property.

With ‘Development’ loans, there carries greater risk; should the development become compromised, or a prospective sale of the development fall through, this could result in investors waiting longer to earn their returns or, in extreme circumstances, easyMoney stepping in to complete the development.

Access

To access funds before the end of the loan term (maturity date), investors can choose to sell some or all of their lent funds on the easyMoney secondary market.

In the test we conducted, the full value of the account (capital plus interest) was sold within 1 day. This is very acceptable considering easyMoney is a new entrant in the market.

While the test proved the efficacy of the easyMoney secondary market, there’s no guarantees when it comes to gaining early access to funds, it is dependent on liquidity, and for new entrants achieving liquidity can be a challenge.  

Key Learnings

• Limited track record to evaluate (launched early 2018)
• Acceptable time to deploy funds, mitigating cash drag concerns
• Acceptable security package, although ‘Development’ loans carry greater risk
• Diversification limited, takes time to build up holdings
• Interest rate low, specifically on ‘Classic’ product
• Higher rate products require significant investment, £10,000 for ‘Premium’ product (7.28% p.a), and £100,000 for ‘HNW’ product (8% p.a)
• Concerns regarding liquidity

A clear consideration is the fact investors are required to invest significant sums to achieve higher returns. The difference between the ‘Premium’ and ‘High Net Worth’ product returns doesn’t feel commensurate with the difference between minimum investment amounts.

The ‘Benefits’ section of the website may incentivise investors to dip their toe. The easyMoney Plus Card provides discounts at well-known retailers, cinemas, and so on. However, a £1,000 investment is required.

Conclusion

easyMoney is perhaps most comparable with Octopus Choice, the subsidiary of a large group – Octopus Group – and a well-known P2P property lender facilitating bridging loans (smaller proportion of loan book). Both providers have low minimum investments and almost the same target return (in terms of the easyMoney ‘Classic’ product). Key differences surface, namely diversification, which is limited at easyMoney, and uncertainty over liquidity. In time, easyMoney will build up a track record, which is important when there are other providers offering similar products and who have been in the market longer.

The UK’s three largest consumer lending P2P platforms Zopa, RateSetter and Lending Works have all raised investor rates in the past year. For the 3 years prior all three have had their rates squeezed as competition from traditional lenders and new bank lenders, such as Sainsbury’s Bank, increased.

With heightened competition for borrowers, investors on these consumer lending P2P platforms have had to accept a lower return for the same risk. It’s therefore a welcomed relief to see a trend of increasing returns emerge in the past year.

The chart below shows this general trend for RateSetter’s 5-year product.

Figure 1: RateSetter's 5 year market rate

Lending Works increased their rates initially in January 2018 and subsequently again in November 2018. Rates are now the highest they have been in 3 years.

Figure 2: Lending Works 5 year and 3 year rates

Similarly, in September 2018, Zopa increased their rates across both their core and plus products from 4% to 4.5% and 4.6% to 5.2% respectively.

Although not meteoric, these uplifts are positive for investors and brings returns of P2P consumer lending closer to returns in the P2P business lending sub-sector. Both RateSetter and Lending Works products come with an added benefit of a fully functioning provision fund, increasing the predictability of investor returns. The key question I have is whether this is a better deal for investors or are investors exposed to more risk?

With higher investor rates we would expect higher borrower rates, or an expected fall in defaults. Lending Works and Zopa publish their borrower rates as shown in the table below. It can be seen that Lending Works borrowers are paying almost 2% more in 2018 compared to 2017, while Zopa borrower rates have dropped from 2017 to 2018.

Figure 3: Weighted Average Borrower APR of Loans Originated that year

If the expected default or bad debt (default minus recoveries) rates at the platforms were to rise during this period this would indicate that an increase in returns is a result of an increase in risk.

Figure 4: Projected default and bad debt rates

Lending Works are forecasting that their bad debt rate will drop from 5.6% in 2017 to 4.3% in 2018. Although borrowers are paying more for their loans, they expect a lower bad debt rate, implying that investors are taking less risk for the higher returns received.

Similarly, Zopa have reduced their default expectations in 2017, 4.52% to 2018, 3.32%. This is in line with Zopa reducing the amount of lending in their higher risk, higher return D-E category loans announced in August 2017. Similarly, this would imply that investors are receiving higher returns for less risk.

RateSetter’s expected bad debt rate is anticipated to increase this year, indicating that investors might be taking on more risk when investing on this platform. It’s worth noting that RateSetter lends to both businesses and consumers with 30% of their 2018 origination to date relating to business lending.

On the Lending Works and Zopa platforms, an increase in returns but a decrease in expected defaults suggests that investors are getting a better return for less risk. There are two other potential reasons for this. Firstly, there might be an imbalance at these P2P platforms with an oversupply of borrowers needing capital vs. the amount of people wanting to invest. This would drive up investor rates. Secondly, the cost of borrowing is rising in general as a result of two interest rate rises in the past year. The competitive landscape has changed with all consumer borrowers now paying more as a result of these interest rate rises. How P2P will fare as interest rates rise is a point continuously challenged by sector onlookers and this could be an early sign that P2P rates will rise in line with interest rates.

This post is a condensed version of our ‘Octopus Choice Investment Report’. We produce these in-depth reports to support with due diligence of the peer to peer lending (P2P) market. This report is designed to help investors, as well as financial advisers, get comfortable with Octopus Choice. If you have any questions, whether investor or adviser, please get in touch, info@orcamoney.com.

The full Investment Report and Executive Summary can be downloaded by clicking the buttons below.

The report includes the following chapters:

• Investment Security
• Considerations
• Investing
• Operator
• Performance
• Liquidity
• Borrower
• Adviser Considerations (for financial advisers)

Download Report                                   Download Summary

Octopus Choice (“Octopus” and “Platform”) is a UK-based peer to peer lending (P2P) platform offered by Octopus Co-Lend Ltd, a subsidiary wholly owned by Octopus Capital Ltd (“Group”). Octopus Choice is the innovation of the Octopus Group and is distributed to financial advisers and DIY investors. Octopus Choice directly connects UK property professionals with investors seeking a secure and stable return.

The insights detailed below derive from loan book analysis conducted on Octopus Choice’s historic loan book, with data correct at 16^th October 2018.

Investing Details

The platform offers an “auto-bid/auto-lend” product where investors’ capital is automatically allocated to a mix of loans, creating a portfolio comprising approximately 10-60 loans. Octopus initially funds loans approved onto the platform, before transferring loans to investors as their capital flows onto the platform. This reduces the time it takes for funds to be lent out as there is a pool of available loans, it also ensures borrowers receive funds in a timely manner. Investors do not have the option of building their own portfolio of loans – Octopus holds discretion over the underlying assets invested in, and the asset allocation.

Table 1: Investment Details

Investment Security

All Octopus loans are secured against tangible assets, with a first legal charge over residential or commercial property; 97% of loans are secured on residential property. Octopus makes conservative loans, with an average loan-to-value (LTV) ratio of 62% and with a maximum LTV of 76% for residential loans and 65% for commercial loans. Octopus also invests alongside investors in up to 5% of each loan in a ‘first loss’ position, meaning the platform would lose capital and interest before any investors should a borrower default and the asset securing the loan fails to recover the debt owed.

The minimum, average and maximum loan-to-value (LTV) ratios for the varying loan types can be found below.

Table 2: Min, Max, Avg. Loan-to-Value Ratios. Source: Orca Analysis of Octopus Loan Book.

Amount Lent

Octopus Choice (Octopus) has facilitated over £315 million worth of loans since launch in 2016. The chart demonstrates an increase in origination year on year, with significant growth 2016 to 2017 (167% growth); while growth subsided 2017 to 2018 (33% growth). As loans repay, the Principal Repaid metric will begin to outweigh the Principal Outstanding metric. For 2018, 91% of loans are live, in circulation, this compares with 2016 where 74% of loans have redeemed (completed).

Chart 1: Principal Outstanding v Principal Repaid. Source: Orca Analysis of Octopus Loan Book.

Net Returns

Investors can expect a target rate of return of 4% per annum (p.a), which is gross of tax, and paid monthly with the option of re-investing interest for compound growth or withdrawing for income. The actual rate of return depends on the individual loans held within the investor’s portfolio and can vary over time as new loans are automatically invested into. The chart below confirms Octopus Choice’s ability at forecasting their returns accurately. The platform has narrowly exceeded the target return each year, demonstrating the stability in their returns.

Chart 2: Octopus Choice Net Returns v Estimated Returns. Source: Orca Analysis of Octopus Loan Book.

Borrowers

Octopus loans are predominantly Buy-To-Let (BTL) – 55% of total historic loan book value – but the platform also offers Bridge-To-Let (B2L), Bridge and Commercial loans. Commercial loans typically include shops, mixed use properties, pubs, industrial units, etc. Borrowers typically borrow £500,000 or more; the average borrowed according to the historic loan book is £681,755. The range is £55,300 to £7,602,000.

The chart below displays the breakdown of the loan book by loan purpose.

Chart 3: Loan Type Breakdown. Source: Orca Analysis of Octopus Loan Book.

Defaults & Recovery

Octopus Choice does not model an expected default rate into its interest rate calculation for investors. The platform will review its position on this when the regulator (FCA) and peer to peer lending industry define a standard definition for defaults.

Octopus defines a ‘default’ as a loan in which the borrower has missed two calendar months of interest payments, or the loan has run over its initial term. In this event, investors cannot buy or sell loan parts. Octopus investors have suffered no capital losses since the platform launched. However, past performance is not a reliable indicator of future results.

Chart 4: Default Rate. Source: Orca Analysis of Octopus Loan Book.

Click below to view

Octopus Choice Analytics Profile

Access

All Octopus loans repay the principal investment at the end of the term, when the loan matures. This means an investor’s capital (principal) is tied up for the duration of the loan, unless they choose to sell their holdings early to withdraw cash; selling loans early is subject to liquidity.

NB: Loans are typically short term, with an average term of 26 months across 463 loans (total loan book).

There is no minimum investment period, therefore investors can request to withdraw at any time, subject to liquidity, without incurring charges. Loan parts will usually be sold to new investors in order to facilitate withdrawal, but Octopus may buyback loan parts to ensure quick access. 95% of liquidity requests have been processed within 5 days, however, there are no guarantees.

Adviser Considerations

There is a section in the report dedicated to helping advisers evaluate Octopus Choice, paying particular attention to the adviser-friendly features of the product but also the considerations of recommending such a product.

In summary, some of the benefits include:

• Strong securityLoans underwritten with 1st charge over physical assetsOctopus invests in 5% ‘first loss’ position on each loan
• Exposure to varying property loansBuy-to-let loans account for 55% of the loan bookBridge-to-let loans account for 24% of the loan bookBridge loans account for 12% of the loan bookCommercial loans account for 9% of the loan book
• Client-friendly interfaceAdvisers & clients can login to a centralised dashboard to view client accounts

Some of the considerations advisers should evaluate include:

• No FSCS protectionP2P loans are not protected by the Financial Service Compensation Scheme (FSCS)
• Market concentrationAll Octopus loans are made into the UK property market, typically buy-to-let
• Client suitabilityOctopus offers support to advisers regarding client suitability assessment

If you’re an adviser, click the button below to read the full report, paying particular attention to section 9.0

Download Full 'Octopus Choice Investment Report'

Conclusion

Octopus Choice has made impressive progress since launching in 2016. Fairly young, relatively speaking, the platform has already facilitated over £300m worth or property loans, with zero losses (past performance is not a guarantee of future results), delivering on their target 4% per annum returns. For advisers, Octopus Choice is the P2P provider most will heard of and, indeed, most will use. The platform is part of the Octopus Group; a major presence in the intermediary market, delivering products and services for the past 20 years. A platform’s stability is a primary concern, and Octopus Choice appears as if it will stand the test of time due to its backing, but also its demonstrable ability to deliver stable returns while lending conservatively. Concerns around market concentration should be considered, and also the lack of Financial Services Compensation Scheme protection on lent funds, of course.  

Growth Street is a peer to peer lending (P2P) platform with a unique slant on the business lending market. Borrowers are offered a line of credit similar to that of an overdraft and investors are able to invest in loans which are sanctioned under the line of credit agreements. The beauty of investing through Growth Street is that the term of the loans is very short, under 30 days in duration, which delivers inherent investor liquidity into the product. Investors are able to access their funds within 30 days when loans are paid off or reinvest capital into new loans. We’ve started a trial of the investment product and keen to provide some feedback.

Figure 1: Growth Street key facts

Investor offering

Growth Street’s Loan Loss Provision (Provision Fund) is central to its investor offering. Similar to RateSetter’s Provision fund, the Growth Street Loan Loss Provision pays investors automatically in the event of a borrower being late with a repayment or when it is likely that the original funds lent are irrecoverable.

The availability of the Loan Loss Provision mitigates the need for diversification across a large number of borrowers on the platform, as defaults are automatically covered by the fund. The risks are the same whether your funds are matched to one borrower or many borrowers.

My entire £1,000 investment was matched within half a day to a single loan contract with a 30-day term. Normally, this level of diversification would be a concern but if the repayments are late the Loan Loss Provision fund should cover the loss.

The loan I was matched to has a rate of 5.18% which is slightly below the advertised rate of 5.3%. The advertised rate assumes that investors’ funds are continually reinvested into new loans with no time lag in between one loan being repaid and another starting. Over the year it is possible that my funds will be matched to slightly higher rate loans to achieve the 5.3%. With this loan, my funds were matched within half a day, which is impressive, however if delays in the matching time increased this could impact the return. On Growth Street’s matching page investors are able to view both the current estimated time to match funds and the deployment rate, defined as the percentage of investors’ funds currently matched to borrowers earning interest.

Figure 2: Growth Street Dashboard

What are the risks?

The principal risk when investing on the Growth Street platform is that a large number of borrowers default on their loans which resultantly consumes the Loan Loss Provision. If this was to occur, Growth Street would call a ‘Resolution Event’ where all outstanding loan contracts are assigned to the Loan Loss Provision and all repayments are collected by the Loan Loss Provision. Again, this works in a similar manner to the RateSetter provision fund.

The Loan Loss Provision has a current balance of £1.1 million, providing coverage to 5.9% of the total loans outstanding. Essentially, 5.9% of the amount currently lent out would have to default before the Loan Loss Provision is consumed. The expected default rate across the loan book is 3.3%.

The other major risk when investing with Growth Street is that the company becomes financially unstable and ceases trading. Although Growth Street has a fully funded run-off plan that would kick in allowing for the borrowers to continue with their repayments of their loans, this event would cause turbulence for investors.

What are you investing in?

Growth Street provides a line of credit to businesses for working capital and cash flow purposes. It works like an overdraft where businesses can dip in and out each month to fund the purchasing of stock and hiring. Borrowers typically pay 7.2% of lending amounts ranging from £25k to £2m. Most loans are secured by a charge on all business assets, but in some instances Growth Street may ask the directors to provide personal guarantees, alongside or instead of a debenture.

The sign-up process

With only one investor product to choose from the process of investing is simple and funds appear to be matched very quickly. The website is clear, factual and provides an in-depth overview of what the investor is investing in. Investors are, however, required to self-certify as a high net worth, sophisticated investor or restricted investor and complete an appropriateness test during the sign-up process which takes extra time.

Growth Street benefits

• Access within 30 days linked to the loan terms
• Provision fund provides diversification across the loan book and provides consistent stable returns
• £70.6 million of cumulative lending since launching in 2016
• Very simple product offering
• Factual, descriptive website
• Hands off investing

Growth Street considerations

• No Innovative Finance ISA
• Limited control which might not appeal to certain investors
• The provision fund reduces investor returns as a % of the borrower repayments sit idle waiting to cover defaults
• Longer sign up process

Conclusion

One of the big push backs within the peer to peer lending sector is liquidity. By offering borrowers lines of credits, loan terms are 30 days or less. It’s a unique proposition that has liquidity inherently built into the investment offering. The presence of the provision fund further mutes the impacts of any defaults providing stable, consistent returns, which combined with a hands-off approach to investing, might appeal to investors who are more time precious.

Proplend is a UK peer to peer lending (P2P) platform which facilitates commercial property loans. Historically, investors with Proplend have had to manually select the loans they wish to invest in. Now, the platform has launched an ‘Auto-Lend’ product alongside its ‘Manual’ product, enabling the automatic investment of cash into the least risky loans available. Here are the details.

Key Platform Details

Table 1: Proplend Platform Details

Proplend ‘Auto-Lend’ Overview

Key Product Details

Table 2: Proplend 'Auto-Lend' Details

How it Works

Proplend investors can enable Auto-Lend by clicking the button in their Proplend account. Once enabled, any cash available in the account will be swept and automatically allocated to ‘In Funding’ and ‘Proplend Loan Exchange’ (PLE) Tranche A investments.

Investors can expect an average rate of return of 5% and will be allocated to the least risky loans on offer.

Investors must ‘Turn On’ Auto-Lend on their Lender Dashboard

Investment Process

With Auto-Lend enabled, funds are allocated to ‘In Funding’ or ‘Proplend Loan Exchange’ Tranche A loans.

In Funding is the primary market where new loans are launched. It runs every morning (assuming loan availability).

Proplend Loan Exchange (PLE) is the secondary market where loan parts can be bought and sold. It runs every evening (assuming loan availability).

Deploying Funds

There are three ways funds can be deployed under Auto-Lend, each has implications on the time it takes for funds to be matched to loans:

1. Invest principal plus accrued interest to receive loans from PLEInvestors must fund the accrued interest on a PLE loan to be allocated itPLE is fairly active, with loans regularly on sale. The PLE runs daily after 3pm.Deployment achieved within a day
2. Invest principal only and await a PLE loan’s next interest payment dateAs soon as the next monthly interest payment has been made, a loan’s interest is reset to zero at which point principal can be allocatedDeployment depends on when the next loan interest payment date is. This could take several days.
3. Invest principal only and await In Funding (new) loansIf an In Funding loan launches before a PLE loan reaches its next interest payment date, investors will be allocated to the In Funding loanLimited new loans on Proplend. Deployment could take several days or weeks.

Loan Allocation

Proplend categorises loans into three tranches relative to their riskiness; primarily the level of loan-to-value (LTV) ratio. The tranche determines the interest rate received.

Interest rates displayed below are average annual interest rates after fees, but before bad debt and taxes, and assume no interest is reinvested.

Table 3: Proplend Tranches

With Auto-Lend enabled, funds are allocated to Tranche A loans. Auto-Lend grants priority access to Tranche A In Funding loans before they’re made available to Manual investors.

Token Queue Process

A token creation process is used where available cash balances are divided into £1,000 parts and each token goes into a queue in the order the investor joined the platform. All enabled accounts with £1,000+ available cash will be allocated a loan part before any account has a second token processed.

Open Proplend Account

Diversification

The number of loans an investor is allocated to depends on the amount invested. Proplend has a 20% concentration limit, meaning no more than 20% of a total account value will be allocated to a single loan, assuming the account value is £5,000 or more.

Proplend highlights a number of scenarios, these include:

Scenario 1: No loan holdings, cash only

£20,000 cash available. Auto-Lend can only allocate up to £4,000 (20%) to any one loan. Diversification across 5 loans achieved (subject to availability).

Scenario 2: Existing loan holdings & cash

£16,000 invested across 4 loans (any tranches) and £4,000 cash available. Auto-Lend looks to invest all the cash (20% of the account value) into the next available Tranche A loan.

Scenario 3: New account, cash deposit

£1,000 deposited as cash. Auto-Lend allocates to next available Tranche A loan.

NB: Enabling Auto-Lend with existing holdings may mean available cash is auto-invested into relatively few loans and larger amounts.

Note to readers: I personally invested money and had funds matched the same day. I invested enough to cover the principal and accrued interest of a single PLE loan. My gross interest is 6.4%.

Access

There are two main steps to accessing funds early when Auto-Lend is enabled:

Step 1: Turn off Auto-Lend on the Lender Dashboard (see pic above)

Step 2: Choose the loan(s) you want to sell on the Proplend Loan Exchange

There are no guarantees funds can be accessed early. However, Proplend does maintain a fairly active secondary market, so loan parts can be traded quickly in normal conditions.

Benefits

• Hassle free investing, no manual selection required
• Allocation to least risky loans
• Active secondary market to sell holdings

Considerations

• Limited diversification on low investment amounts
• Uncertainty over time to deploy (invest) funds
• Reduced rate of return

Conclusion

Proplend is adding greater value for its investors by introducing their Auto-Lend function. Investors can still select individual loans at Proplend, by way of the Manual function, but can also have spare cash automatically swept and allocated to the least risky, Tranche A, loans offered on the primary and secondary markets. Proplend’s real limitations lie in the availability of loans, meaning diversification can be hard to achieve. Higher value investors should be adequately diversified, but generally it may take some time to build up holdings.

]]>https://orca.ghost.io/halloween-treat-2018/Ghost__Post__5c5addd4cfc79900c047a0cbFri, 26 Oct 2018 13:14:00 GMT

*Update: This offer is now CLOSED*

It’s not long until the spookiest night of the year… But your investments may fear not, we’ve just announced a Halloween treat for new investors to enjoy!

We are giving away Amazon Echo Dots to new investors who open an Orca Account and invest between now and midnight on Halloween (31^st of October 2018).*

*Existing Orca investors do not qualify for this gift.

Whether you plan on keeping it for yourself or re-gifting it to your nephew this Christmas, you can invest at any level to receive this treat. So long as you make your first deposit before the deadline, your free Amazon Echo Dot will be sent to you after your Orca Account has been funded and active for 30 days.

Jordan Stodart, Co-Founder of Orca, stated “this is our first Halloween since launching the Orca Investment Platform in February. We are delighted with the response to the product so far, but are also continually looking at ways to further enhance it; thanks to our users for their invaluable feedback helping shape our ideas. As we enter the festive season, we want to offer new investors a treat to say ‘thanks for sharing our vision and choosing to invest with Orca’.”

Stodart goes on to say:

We’re reaching the end of our Seedrs equity fundraising campaign and are excited to put the funds to good use…there are some major developments in store at Orca! For now, we hope you new investors enjoy this treat from us.

Peer to peer lending (P2P) platforms are split between those who offer auto-invest products where your funds are automatically diversified across the loan book and self-select platforms where you can select individual loans. Platforms typically launch with self-select offerings, and recently we’ve seen a trend with these platforms migrating to auto-invest solutions. This is often due to a limited availability of loans - a requirement for auto-invest products - in the early stages of a platform’s growth.

This trend has become even more apparent with five historically self-select P2P platforms (Proplend, ArchOver, ThinCats, Lendy and HouseCrowd) recently launching auto-invest options. This is a first look at ThinCats offering.

ThinCats Quick Facts

Diversified Loan Portfolio

ThinCats have begun to offer what they call a ‘Diversified Loan Portfolio (DLP)’. This gives investors the ability to invest directly in a pool of between 20 and 40 loans. When selecting individual loans on the ThinCats platform, the minimum investment in a single loan is £1,000. The key benefit of investing in a DLP is that diversification can be achieved for the same minimum investment.

Diversified Loan Portfolios are a very new product offering for ThinCats and there has only been one issue or auction to date. The offering is not run continuously, however, ThinCats have said there is likely to be another issue before the year-end.

How it works?

Institutional investors, including ThinCats’ majority shareholder ESF Capital, invest in loans listed on the ThinCats platform. After a period of time, a proportion of these loans are bundled together in a portfolio and resold to retail investors through a DLP auction. The involvement of institutional investors is necessary to build up the portfolio of loans over a period of time as it’s unlikely that 20-40 loans will be available at any one time on the ThinCats platform.

What is the investment term and can funds be accessed early?

Each DLP has a target term date which is typically 2 years. Investors are not able to sell their holdings early on the secondary market.

Who are the borrowers?

The loans included in a DLP are no different to the borrowers when investing in the self-select option. ThinCats provide finance to SMEs looking to borrow between £100k and £10m. Historically, the average loan size is £310k, however, this is rising with the average loan size in 2018 being £714k.

What security is present?

All lending on ThinCats is secured against the assets of the borrowers. In the event of a borrower defaulting, ThinCats have the right under the terms of the loan agreement to take control of the asset to recover any potential capital losses as a result of the default.

What are the investor fees?

Across all accounts, ThinCats charge 10% of the investors return. Therefore, if you are due a 10% return from a borrower, your net after ThinCat’s fee will be 9%. For an 8% gross return, you will pay 0.8% in fees, providing 7.2% net.

When investing in a DLP, ThinCats charge an additional administration fee of 1% on top of their standard investor fee. If selling individual loans on the ThinCats secondary market an additional 1% fee is charged.

ThinCats Positives

• Large backer in ESF Capital
• Institutional investor presence on the platform
• Transparent
• Asset secured
• History of lending
• IFISA eligible

Specific Positives of DLP auctions

• Achieve diversification at £1,000 minimum
• Hassle free investing

ThinCats Negatives

• Limited availability of loans
• The website is slow and clunky
• No ISA transfers
• High minimum allocation to single loans

Specific Negatives of DLP auctions

• Not a continuous offering

Conclusion

The Diversified Investment Portfolio is a drive to attract retail investors and the offering has clear diversification benefits which may appeal to mainstream ISA investors in particular. It is, however, still very new and the offering is not continuously available. If executed correctly, it does have the potential to progress into a great offering for retail investors.

We’ve been speaking with financial advisers* for over a year, trying to understand why they struggle to get to grips with peer to peer lending (P2P). The feedback has been enlightening with most claiming there’s just too much risk and too many barriers involved to formally advise on P2P. But, we believe many of the barriers intermediaries face can be overcome, and should be overcome, to ensure their clients are offered the best choices in the market.

*Typically ‘independent advisers’ who can offer the full range of financial products and providers available.

Here are some of the barriers we’ve recorded from conversations with several intermediaries.

1. Difficult to place P2P on a standard risk scale

Advisers will use a scale to determine the riskiness of an asset class (or investment sector), evaluating its characteristics and producing a score which can be measured relative to other asset classes. The scale is typically 1-10: cash and government bonds will sit at the lower end of the risk scale, while equities will sit at the higher end of the scale.

As P2P lending is broadly considered to be a new asset class by advisers, it’s hard for them to place P2P on a scale and measure against other asset classes, particularly when it’s not weathered multiple economic cycles and been robustly tested.

In our opinion, P2P can be viewed alongside other asset classes in a typical multi-asset class portfolio as illustrated below.

Figure 1: Multi-asset-class portfolio. Source: Orca

Placing P2P on a risk scale is reliant on the adviser evaluating the characteristics of the investment, which is not impossible.

2. Difficult to compare the whole market

There are many providers operating in the P2P lending market, offering varied types of lending; unsecured consumer loans versus secured property, for example. For an adviser, evaluating risk can be complex and time-consuming.

There are solutions available which alleviate this burden, such as Orca, which conducts due diligence on providers and their products, before building and executing a portfolio on behalf of the investor.

3. Client suitability assessment concerns

As with placing P2P on a risk scale, advisers have found it difficult to perform their client suitability obligations as no standard template has existed to help them assess their clients’ suitability relative to P2P.

The FCA outlines key factors to consider when assessing suitability. As well, some compliance support services have created P2P suitability templates. Ask your adviser if their compliance regime has such a template.

4. Professional indemnity insurance concerns

Professional indemnity insurance (PII) is considered a “grey area” by many advisers. According to an article published by Peer2Peer Finance News, ‘some independent financial advisers assume it is covered under the general advice section of their policy, whereas others do not think it is covered at all.’

While talking with some of the more forward-thinking advisers, their understanding is that they’d simply have to contact their insurance provider and potentially pay a premium to gain coverage.

This is of course a cost which would only be justifiable if the adviser began recommending P2P.

5. Regulatory concerns

Many advisers we spoke with thought peer to peer lending was unregulated. Since 2014, the FCA has mandated that all P2P lending platforms operating in accordance with article 36H of the Regulated Activities Order must be fully regulated. Virtually all of the major players in the market are fully regulated at the time of writing.

This should not detract from the fact that peer to peer lending is not covered by the Financial Services Compensation Scheme (FSCS), meaning an investor’s funds are not covered in the event of loss due to borrower default.

6. Simple and efficient solutions are hard to find

For the progressive advisers who see value in allocating 5-10% of their clients’ portfolios to P2P, they still face the problem of evaluating the market and building a diversified portfolio of P2P investments.

Aggregators, like ours at Orca, offer advisers and their client-base access to the market without the requisite due diligence of each underlying P2P platform and the administrative burden of building a portfolio of multiple P2P investment providers.

7. Tax efficient product providers low in supply

P2P investments can be held within a tax-efficient ISA, the Innovative Finance ISA (IFISA). There are dozens of IFISA providers on the market.

There are a few SIPP operators who have partnered with P2P platforms to offer more bespoke SIPP schemes, but no major operators have adopted P2P as yet.

The issue for advisers may be that their clients’ annual ISA subscription allowances are fully apportioned to other investments each tax-year, and, there are no major SIPP operators who have overcome the challenge of P2P being a non-standard investment or the issue of connected parties.

Conclusion

Financial advisers - specifically independent advisers - have a responsibility to evaluate the whole retail market when advising clients on investments. Peer to peer lending provides stable, uncorrelated and attractive returns and should be viewed as an effective tool to diversify clients’ portfolios. There are solutions available which remove the complexity of evaluating the market and the burden of building portfolios of P2P investments. Take Orca, for example.

The question is: Are advisers shunning P2P because they’re concerned with their own reputational (business) risk or their clients’ risk?

If you’re an adviser, get in touch to hear more info@orcamoney.com

The HMRC publishes ISA statistics every August, relating to the previous tax year. The alternative lending industry cry success immediately after any Innovative Finance ISA (IFISA) figures are released, while mainstream financial media have reported the arrival of the IFISA as a damp squib. Prior to the launch of the IFISA GoCompare guesstimated that demand for the IFISA would exceed two million accounts per year.

With this context we’re keen to investigate the success of the IFISA.

Below are the HMRC figures that have been released covering the past two tax years.

Source: HMRC

With respect to the size of the peer to peer lending (P2P) market, IFISA data presented by the HMRC is low (£4.2bn was invested through UK P2P platforms in 2017, calendar year). Although this £4.2bn figure includes institutional capital, the amount of funds held within ISAs is still likely to be significantly lower than the amount of funds held within general investment accounts.

This HMRC data cannot, however, be relied upon to paint a complete picture of the uptake of the IFISA due to the following reasons:

1. HMRC statistics do not account for ISA transfers
2. Investors can only subscribe new money to one IFISA per year. For investors with multiple P2P accounts, only one can be wrapped in an IFISA.
3. P2P platforms launched their ISAs sporadically, between April 2016 and May 18

Regulatory delays meant the launch of IFISAs by P2P platforms spanned across the past 30 months. ISA investing is heavily seasonal around the tax-year-end so platforms who have marketed their ISA over two tax years have seen a significant benefit in terms of IFISA traction.

Crowdstacker and Crowd2Fund were first to market, gaining traction from early adopters. When Lending Works launched its IFISA in February 2017 it hit its £1m borrower demand limit within 24 hours of launch due to ‘unbelievable demand’.

Although investors may only subscribe new ISA money (£20,000 limit across all ISA types) to one IFISA in a given tax year, they can open multiple IFISAs and transfer old money into multiple IFISAs in the same tax year. The importance of ISA transfers was highlighted in a PeertoPeer Finance Newsarticle stating that a third of all IFISA money comes from ISA transfers. Lending Works has reported an ISA transfer as high as £154,000 in May 17, while Landbay stated average ISA transfers are £39,000.

Consistent with investor feedback that Orca has received, it is likely that existing P2P investors favour investing through an ISA in the long term and are likely to convert non-ISA accounts with new subscription money as time passes; essentially, opening one IFISA per year and slowly converting non-ISA accounts across. It’s important to note that investors are further taking advantage of the personal tax allowance, where they are not required to pay tax on upto £1,000 of interest earned. A £20,000 investment, yielding 5%, would still fit within this limit.

The Funding Circle IPO prospectus showed that the average account size of ISAs is roughly double that of general investment accounts. Furthermore, the average account balance has risen considerably quicker.

Source: Funding Circle IPO registration document

Conclusions

The IFISA has not grown to GoCompare’s estimated 2 million accounts, however the user benefit of the IFISA is clear. One hypothesis is that growth in the IFISA has largely come from existing P2P investors converting their non- ISA accounts. Although this is good, it would be great to see that ‘wall’ of new investors enter the market.

One major issue is that investors are not able to hold multiple direct P2P investments within one IFISA. This means building a diversified portfolio is difficult for mainstream investors. This clears a space for an aggregator such as Orca to offer an IFISA that allows investors to invest across multiple P2P investments. Watch this space…

[1] P2PFinanceNews Article (Sept 17) and Crowdstacker statistics page (July 18). % of retail funds is an estimate.

[2] RateSetter press release, May 18

[3] Lending Works infographic , May 17

[4] Funding Circle IPO registration document, Sept 18

First thing first, Orca is still open for investment on the Seedrs equity crowdfunding platform. Yes, we did achieve our initial target raise just 2 days after campaign launch, but overfunding allows you and others to share a piece of our growing business – the campaign will close in a matter of weeks, so please get in touch if you’re still undecided.

Investment sought:    £500,000

Investment funded:    £543,930 (109% of target)

For equity:                  23.71%

(As of 3 October 2018)

The Big Plan

If you haven’t been following Orca recently, we launched a crowdfunding campaign mid-September. The funds raised will help us realise our ambitious goals over the coming years. Here are some strategic objectives we’ll address with the funds raised.

1. Grow our customer base

As with any business that is scaling up, customers are crucial. Some key channels we will focus on post-fund-raise to acquire customers include partnerships, digital marketing, PR, paid media and our brand. We are already in advanced discussions with a number of potential partners, including firms in the intermediary/financial advice market.

2. Integrate with more lenders

If you work for a lender (P2P or other) that’s interested in integrating with Orca, get in touch. We are developing a healthy pipeline of prospective P2P platform partners and anticipate integrating with a number of new platforms in the coming months.

By integrating new partners with the Orca product, we will increase choice for our customers and diversify their exposure even further.

3. Enhance product features

We want to continually add value for our customers. This is why we’re exploring iterations to the product which include giving investors control over the portfolio composition; more control, more of a personalised portfolio. This is just one enhancement, watch this space.

4. Further develop Orca’s research service

Orca is a research service by trade. We began as analysts of the market and still offer this service today. In time, we will serve up more research to help investors navigate the market.

We also believe in transparency and are happy to display the research we conduct on partner providers.

5. Build the product for European expansion

The UK P2P lending market is growing at an impressive rate in terms of capital lent but is still a fraction of the addressable market in terms of active retail investors. In the wider EU market, investors have displayed a clear desire to gain exposure to UK P2P. We are looking into this.

Questions?

You can download our pitch deck on our Seedrs page and pose questions in the ‘Discussion’ section where a senior staff member will respond.

Please feel free to get in touch via info@orcamoney.com or our Live Chat as well. We’re keen to hear from you.

This is an interview with the co-founder of Propio, Tom Buttress. Propio is a "crowdfunding platform" offering "ordinary people" the opportunity to invest in property development from £250. Tom leads the day-to-day management of the company and gave us interesting insights into the challenges of launching a platform in the market, the structure of investments and plans for the coming years. Enjoy!

Can you provide an overview of Propio?

Propio is a property crowdfunding platform that enables ordinary people to invest in property development from just £250. Our team of property experts pre-vets every opportunity and our easy-to-use website allows investors to spread their money across multiple property developments around the UK.

Investors can choose whether to put their money into loans which are directly secured against property or into development opportunities that build value, allowing them to take a share in the profits.

Why did you start Propio and what was your biggest challenge in launching the platform?

The idea was born out of our own experience. We’re a team of property developers and specialist property lenders who, over our careers, have been responsible for more than half a billion pounds worth of property transactions. We’ve seen first-hand how difficult it can be for smaller property developers to get the funding they needed to build more much needed homes. At the same time, we’ve seen how property investing, whilst lucrative, is often only accessible to the financial elite, leaving everyday investors excluded.

Our mission at Propio is to bring together developers and investors in a way which not only benefits investment portfolios, but also helps build more homes in the UK.

What type of loans is Propio’s sweet spot?

At Propio, we focus on funding residential development; financing the planning, construction or sales phases of ground-up developments, conversion or refurbishment projects. Our investments are short, typically 6-24 months in length, and offer clear exit strategies such as selling or refinancing. Returns are based on the risk involved; with loans secured against property offering returns of between 6 and 10% per year. Equity based investments, whilst inherently riskier, offer expected returns of over 15% per year.

Can you describe what the investor is investing in and how this is linked to the underlying loans?

Firstly, I should explain that all our investments are set up as individual UK limited companies (known as a special purpose vehicle or SPV) which ensures each investment is segregated from the other investments on our platform and Propio itself. In the event one of the investments on Propio goes wrong or the platform folds, your investments are self-contained and so cannot be impacted.

When investing in one of our loans, investors receive bonds issued by the SPV which are proportionate to the amount they invest. They also receive a share in the security over the property asset – this is typically in the form of a first legal charge, generally up to 70% of the maximum loan to value. It’s worth noting that unlike many peer to peer firms, this security is held and enforced by an FCA regulated third party trustee – thereby ensuring investors' funds are recovered fairly and efficiently in the event of default.

Things are a little different for our equity investments, where shares are issued by the development company SPV - which is set up specifically to finance the project. Unlike our loans, there is no security and returns depend on how quickly the development is built and sold and the final sales price. However, that doesn’t mean we leave getting a good return to chance; our investment team only select investments that pass our rigorous vetting process. In fact, we put our own money into all our investments - if it isn’t good enough for us, it isn’t for our investors.

We set up these investments as an FCA registered alternative investment fund to ensure investors’ money is looked after in a compliant way and structure the fund’s mechanics to insulate investors from downside risk – typically we use a minimum “hurdle rate”, which means the developer needs to deliver a minimum investor before they can unlock a greater share of the profits.

In light of the recent FCA proposed regulatory changes, it is interesting that you have selected a bond structure instead of peer to peer lending. Can you explain your reasons for this?

For the most part, this was because we wanted to be able to offer equity investments as well as debt. As equity investments are not supported under the peer to peer regime, we thought it would be simpler and more efficient to set up the regulatory structure in the same way as an old-school real estate fund manager or hedge fund rather than some form of peer to peer/ fund hybrid. Hence our loan investments are structured as bonds rather than peer to peer contracts, but they essentially deliver the same outcome for the investor.

In addition, during the set-up phase we noticed that the peer to peer landscape was under scrutiny from the FCA. This gave us further reasoning to go down a more tried and test route which we knew the regulator was comfortable with, rather than having to adjust to the evolving peer to peer rules – like many peer to peer platforms are having to do at the moment.

What separates Propio from its competitors and why should investors sign up to the platform?

Firstly, it’s the property experience of the team behind the platform. We’ve already funded £6.5M since launching earlier this year, however, offline (through our development and lending businesses) we’ve lent over £150m and have never lost a penny of investor capital. We have also acquired, constructed and sold over £350M worth of new homes. And it’s this market expertise that Propio investors are able to tap into – we’re not just brokering investments but actively choosing only sound investments for our platform portfolio.

Secondly, it’s the fact that we’re not just focused on loans. Yes, equity investing is inherently riskier and there is potential for investors to get back less than they expect or even in extreme scenarios to lose capital, but there is also the potential to make excellent returns. Our own developments, for example, have achieved double-digit returns per year on average for the past decade and we believe that by investing smaller amounts across a range of these investments, Propio investors are likely to achieve similar results.

How do you anticipate the platform developing over the next 3 years? What does success look like?

Ultimately, our goal is to allow more people to access to the benefits of property investing, especially those that are shut out of getting on the property ladder. We have already lowered our minimum investment from £1,000 to just £250 and are constantly striving to improve our platform to make investing easier and more intuitive.

We’re also planning to launch an ISA later this year which will enable people to invest in certain opportunities tax free. We are also working on more opportunities which will take advantage of growing property markets across the UK in areas including Birmingham and Wales.

Special thanks to Tom for taking part in the interview. If anyone would like to be interviewed as part of this mini-series, or would like to submit a guest post, please get in touch at info@orcamoney.com.

This is the third in our series of peer to peer investor interviews. These interviews are designed to help newbies to the asset class get comfortable before investing. In this interview, we spoke with Nicholas. He is  43 years old, and has been investing in the asset class since 2016. He has a background in financial services. Find out how he invests and why he thinks P2P hasn’t broken the mainstream yet!

O: How long have you been investing in peer to peer lending (P2P)?

N: 2 years

O: Why did you start investing in P2P?

N: I was attracted by the principles behind P2P and having worked in banking during the financial crisis I could see the obvious potential for this form of finance to flourish in a post-crisis banking world. I particularly like the property P2P segment given the asset-backed nature of lending and  feel more comfortable holding this type of exposure during a potential downturn in the economy, versus consumer or business lending exposure.

O: How do you invest and why?

N: I invest in both passive and active P2P products, these being the products where my capital is automatically spread across the loan book and products where I can manually select the loans I wish to invest in.

At the lower end of the risk spectrum, where I’m comfortable with the platform’s approach to risk management and track record, I’m happy to invest passively across the loan book.

At the higher end of the risk spectrum, with increased deal complexity and greater concentration risk, I prefer a more active approach where I select the loan(s) in question.

O: What’s your strategy with P2P lending now and in the future?

N: I plan to increase my P2P exposure over time under the IFISA umbrella as it offers attractive risk-adjusted returns, low correlation with other asset classes and a tax-free income source. My current exposure to P2P relative to my overall investment portfolio is small, so I’m comfortable with increasing this exposure in years to come.

O: What sort of things do you look for in a P2P lending platform/product?

N: Strong management team, exceptional risk management and careful due diligence which is clearly defined and easy-to-understand.

O: How do you view P2P within your broader portfolio?

N: My P2P investments are complementary to my broader portfolio. P2P accounts for approx. 10% of my total investment portfolio.

O: What’s your perspective on the current state of the P2P market?

N: Overall, the P2P market is reasonably sound. Rising interest rates, falling property prices and squeeze in real household incomes may start to impact some P2P segments in the coming 18-24 months. I am concerned about the standards and the lack of investor understanding in some segments of equity crowdfunding.

To date, however, I’ve not suffered any bad experiences in P2P.

O: How do you see the P2P market evolving?

N: Consolidation in certain verticals and successful platforms becoming more dominant.

O: Who do you think P2P lending appeals to most?

N: Wealth accumulators probably mid 30s +

Those with experience in managing own portfolios and good understanding of risk-adjusted returns.

O: What advice would you give to a prospective P2P investor?

N: Really do your homework on management teams, platform, product, liquidity, default scenarios, risk mitigation features.

Alternatively, consider platform aggregators such as Orca which has carefully vetted the P2P lenders on its platform and offers diversification benefits.

O: What are the key challenges facing retail investors in the current climate?

N:

1. Savings returns are very low.
2. Many younger investors have not experienced a severe bear market and might not fully appreciate the benefits of diversification.
3. Under appreciation of saving requirements for a comfortable retirement.

O: Why do you think P2P hasn’t hit the mainstream yet?

N: There’s insufficient education and understanding of P2P lending. This leads to a lack of appreciation of the benefits of diversification and correlations with mainstream savings products. I suspect the current longest equity bull market in the history of financial markets might have something to do with this!

Special thanks to Nicholas for taking part in this interview and sharing his views and experiences. For any questions, email info@orcamoney.com or use the Live Chat. We’re here to help.

]]>https://orca.ghost.io/seedrs-crowdfunding-campaign-now-live/Ghost__Post__5c58720c51e15c00c08cd63bMon, 17 Sep 2018 17:10:00 GMT

Today, we are delighted to announce that Orca’s Seedrs crowdfunding campaign is now open to the public. Orca CEO and co-founder, Iain Niblock, stated, “We are excited to share our business with everyone and to offer our advocates the opportunity to share the benefits of our growth!”

All Orca customers, subscribers and supporters now have the opportunity to become shareholders in our business. Anyone based in the EU can become a shareholder in Orca from as little as £10.13 through the Seedrs crowdfunding platform.

We will be raising £500,000 and offering 22.23% in equity. Those who pre-registered to our campaign have had access to invest since Friday. With 69% of our target already raised (as of September 17th 2018), we expect to hit our target fast!

How Far We’ve Come

For two years, Orca has been providing market-leading research and analysis on the P2P market. We offer real-time data, analytics and commentary, helping investors navigate this often complex and fragmented market.

This year, we made some big changes. We launched the Orca Investment Platform, re-branded and expanded our team in size and geography. Today, not only do we still offer commentary and market data but we also offer an investment platform that automatically diversifies your funds across multiple P2P platforms, borrowers and sectors, all from one dashboard. We are addressing some core issues in the market, including the complexity of building a balanced P2P portfolio and the inefficiency of investing directly at multiple individual platforms.

What You Can Help Us Achieve

“The Orca Investment Platform is live, but further development is necessary to increase the value it offers our users, and to fund this development we’re using Seedrs”, says Niblock.

Already integrated with some of the largest P2P platforms in the market, our main objective is to expand and enhance the offering of the Orca Investment Platform to include a wider range of lenders and investment options.