As of this December my Bondora portfolio is two years old. Since the new credit ratings were implemented earlier this week, and next week the new portfolio managers will be activated then I thought it would be a good idea to run a sort of a summary about what my portfolio looks like in numbers. I ran the numbers taking into account 24 months of investing (1.Dec 2012-30.Nov 2014). Depending on how exactly the new portfolio managers will work, the next monthly review will likely be in a somewhat different format. So, to send off the old year and to say goodbye to the old credit groups, my portfolio in numbers.
My portfolio has always had relatively high returns. Looking at the data that Bondora offers they tell me that I’m overall in the top group of investors making 25%+ by the site’s calculations and among people who have invested at least 24 months and more than 5000€ it ranks me 26th.
By my own calculations my results aren’t entirely that good. XIRR calculations made at the end of November show this as a result: While the wildly optimistic results are similar to what the site shows, it’s prudent to keep a calm head. At least the pessimistic scenario keeps getting better, which is that I’m most interested in keeping track of. (This assumes a 25% recovery rate and +3,5% average sales price for current loans).
In numbers this return on my portfolio looks like this: I added in December, since it’s almost over and I can predict the overall returns for that month pretty well already. Looking into the future, I will be breaking the 100€ interest per month limit before summer for sure.
My returns are in line with the overall interest of loans that I have given out. From the visual you can see though why the Bondora system probably needs an overhaul in terms of loan pricing, the interest rates do look a bit unreasonable, and aren’t really well correlated with credit groups:
Portfolio by credit groups
One of the most interesting aspects of the new credit groups going live was of course seeing whether or not your portfolio managers and handpicked loans were actually any good according to Bondora’s information. My portfolio by the old groups looked like this (I didn’t separate countries since I have so few foreign loans, this is a total of ~500 loan pieces):
It looks quite nice, yes? A lot of A1000 loans from the beginning especially. I have liberally added all sorts of credit groups though to keep money moving, so the ratio of A1000 to other loans was constantly dropping and would have dropped below 50% soon. The new credit ratings though show a very different image of my loans: I was actually expecting a higher amount of low credit group loans. Especially when looking at the loan market right now – I have yet to see any AA or A group loans on the open market, and I haven’t received any since the moment that the new groups went live, so it’s reasonable that they’d be rate in my current portfolio as well. Keep in mind though, that the new ratings assess the risk at the moment of the application – this means that you’re likely to have A or B loans that have defaulted and HR loans that are showing awesome discipline.
Defaulted loans and HR loans
Now for the interesting part! Defaults are what concern most people most when starting. This means that A1000 loans look especially tempting because they show awesome payment histories. This is however not the case, and can be seen from my portfolio as well:
As you can see there is a clear issue with the new and old ratings. What’s even more interesting is how for example A1000 loans were over represented among defaults compared to my full portfolio. It is however clear to see, that almost 40% of my defaults are made up by HR loans, so it’s definitely something to look out for. This is the division of my HR loans into old credit groups:
Like all investors, I will have to completely remake my portfolio managers, since the new system should theoretically allow you to balance between different credit groups better. It is, however great to see that my portfolio has been doing fine, I hope the new portfolio manager allows me to continue the trend, even though I have accepted the fact that returns will be balancing across the board for investors. It will definitely be an interesting start of the year!