Currently in the process of selling all of my Bondora investments

Times have been turbulent for Bondora for a while, and as someone who keeps an eye out for all kinds of changes in P2P investing, even I have managed to lose track of what Bondora is attempting to do. A while back I eliminated my private investing portfolio in Bondora, largely due to tax reasons, but I was still rather optimistic about their long term outlook, which meant that I built a company portfolio that I planned to run with a rather conservative strategy as a part of my p2p portfolio.

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To achieve a conservative portfolio I used an API solution that was self built, and picked loans that were only Estonian, and fell into the more conservative segment, focusing on loans up to C credit group. Within a couple of months I managed to build the portfolio up to about 5000 euros, and while the returns were on the lower end of my portfolio due to the changed risk evaluation policies I was OK with this, as I believed in the long term stability of the portfolio.

Then came all the changes. Firstly the DCA, which, while I understand was necessary was a PR disaster, even though we tried to do our best to help information spread through the investing podcast that we run. The final nail in the coffin, however, is turning out to be the thing that a lot of active investors, including myself, predicted would be the biggest issue – API investments cannot compete against portfolio managers, meaning as long as enough people turn on their autobidders being an active investor is close to impossible.

What this means, is that since the middle of October there has been a steep drop-off for loans, and as such, I have not received a single loan through API bids since October the 13th. Asking around, it seems like other investors are in the same boat as well, leaving only two options available. 1) turning on the automatic portfolio manager or 2) actively trading on the secondary market.

Fundamentally, I do not wish to passively invest in Bondora, which means that if I do turn on the autobidder, it will be just with some play money to test it. I’m just so confused at the direction that Bondora is moving towards – why build all the tools necessary for active investing and then actually make active investing impossible?

Unless the plan was to make API bidding viable for the secondary market only (where it seems to be quite successful). In that case, good luck to all the people making great deals on the secondary market, but I feel the amount of money I currently have in Bondora is not worth the effort of building up the level of statistical modelling which would be required for trading well on the secondary market.

Which means, I’ve slowly started to sell off my company portfolio’s loans, and will continue to do so until I manage to sell most of what I can at value, leaving maybe a small amount of money circulating to see what’s happening. Kind of sad, seeing as Bondora was the portal I started with, and I fundamentally liked their business ideas, but I think my investing ideals have just drifted very far apart from what they’re doing now. Lucky for me, though, there are multiple other viable offers on the market, meaning there is no reason for the money to sit idle!

Bondora private portfolio exit status

One of the changes that happened in my P2P portfolio this summer was exiting my private portfolio in Bondora. I know that I planned to postpone this due to tax reasons, but the portfolio was not really shrinking quickly enough from just normal paybacks, so I decided to pull the plug and sell off my current loans, and some of the defaulted loans which seemed unlikely to ever start making payments.

Before I get into the numbers of how it went, I’ll make one thing clear – my exit is far from ideal since Bondora is a long term investment, and exiting at the 3 year mark from a portfolio that was still in heavy growth phase is clearly not ideal. I haven’t completely stopped investing into Bondora, I did build up a small portfolio for my business account, so I still have some faith in them, but it was more reasonable to exit my private portfolio since the tax obligation would have been ridiculously big otherwise.

Selling off loans – how did it go?

I was lucky in the sense that I had a lot of very interesting oldschool loans from way back when, when the rating system was flaky at best, therefore I got to sell a significant amount of loans at a reasonable premium. However, overall, I’d say that currently selling loans is not a particularly easy task if you wish to do so at a premium. For most loans the premium ended up being in the 3% range, which is clearly less than was once expected from secondary market liquidity. I did sell off some 60+ defaulted loans as well, which I felt were completely hopeless (and had been marked as write-offs), but that obviously hit the portfolio value hard, and it’s difficult to predict whether any recovery would have happened.

Totals & XIRR

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As it stands, at this point I’ve transferred out 5,6K euros out of the originally added 5k euros, which means I’ve at least gotten my money back. Here is where it gets complicated though – the majority of the theoretical future returns are stuck underneath defaulted loans, that are showing very slow recovery. At best the loans pay a few cents monthly, and even the ones that are paying aren’t really impressing me due to the DCA costs currently linked to recovery.

I recalculated my pre-tax XIRR this morning and it’s clearly nothing too impressive. While recovery will end up pulling up the total returns number, then I am less than optimistic when it comes to reaching two-figure returns. The assumptions I’m using for the XIRR calculation are – -30% discount for delayed loans, 10% yearly recovery for defaulted loans. Unless magic starts happening then Bondora will end up being a learning lesson with little economic upside.

While I will keep Bondora in my business portfolio, I am not adding in more money at the moment, since other P2P portals are offering much better risk adjusted returns with significantly less hassle. If this return were with no time spent on managing my portfolio I’d be OK with it, but expecting to land at somewhere in the 8%-range is too low for the active involvement required now (even discounting the fact that I really did exit at a rather bad time, giving well-performing loans little time to compensate for losses from defaults.) Here’s to hoping the recovery is impressive in the long term!

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Panel: Risks and opportunities in P2P lending

Monday there was a pretty cool panel about the risks and opportunities in P2P lending. The panel members were the CEO’s of Bondora, Mintos, Moneyzen and Twino and myself. The panel was held in English and I think we got a pretty good discussion going about what is happening in P2P.

You can now see the panel on Youtube as well, so take a look! (Discussion starts about 5 minutes in.)

Social lending portfolio (April, 2016)

April is by far one of the busiest months of the year for me work-wise, which explains why I have somewhat fallen off the planet (or, well, blog, in this case). Investment radio(EST) also turned 1 year old and I’ve been trying to write a bit more in Estonian at Kristiinvesteerib(EST) so it’s actually been a very busy month! I’ve also weighed the pros and cons of participating in the LHV IPO, so times have been interesting!

I haven’t had much time to deal with my P2P portfolios but things are slowly moving, so I’m hoping that now that I’ve somewhat finished reorganising parts of my portfolio and made some tentative decisions about how to balance investments between  different portals things will smooth out a bit. There will also be P2P investment panel(ENG) later this month with representatives from Bondora, Twino, Mintos, Moneyzen & myself, so I hope that creates a lot of value for people interested in P2P investments.

Bondora personal portfolio

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Despite the fact that I’ve started to transfer money out of my personal portfolio April almost ended up being a record month in terms of interest due to the insane amounts of recovery. The total principal + interest recovered ended up being 55€, which is even more amazing considering the fact that I’ve already started to sell off defaulted loans, reducing the part of my portfolio that is 60+. However, selling things off is going somewhat slowly, I’ve transferred out about 1,2K euros, which is about 25% of the money I’ve invested. I hope to reach about 3K by mid-summer. This money is going straight into index funds at the moment.

Bondora business portfolio

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The business portfolio is slowly growing. And by slowly I mean at a glacial pace since the core of the portfolio – 75% to be exact – is in Estonian AA, A & B loans. Since the core of the portfolio is now set (200+ loan pieces), I will slowly start to spread out my investments over other, more risky groups as well to increase the returns a bit. I will probably aim for something like 25% of my portfolio in higher risk loans.

Omaraha portfolio

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This month the first few loans at Omaraha defaulted for me, which meant accepting a 6€ loss (already discounted from the interest). I expect a bit of a bump in defaults at the start since I invested a bit of a bigger lump sum in December but overall it seems like the discipline for 900+ lenders is rather good.

The biggest issue, I would say, is the falling interest rates – in December 900+ loans went out at 33% easy, now it seems like 28% is the limit. There is definitely more investor money and since Omaraha has limited volumes then it’s still not entirely viable for very large portfolios.

Mintos, Twino, Viventor

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Just to give you something to puzzle over – I don’t really have all that much more funds invested in Twino than I have at Mintos 😉 . I tested turning off the autobidder for Viventor and listed all my loans for sale to see if there is any secondary market movement there and it seems like the answer is – no. Which raises a bit of an issue, I’m not sure I want to add more money there if I can’t exit quickly when necessary. However, they seem to be growing at a rather fast pace, so I hope they do well. Other Latvians weren’t much of a surprise – leaving out the fact that both Twino’s and Mintos’s interest rates for some loans seem to have gone up a bit, which is always nice.

Crowdestate, Estateguru, Moneyzen

Crowdestate seems to be getting to the “full circle” part of the investment wheel – the latest project I added money into, I didn’t need to transfer in additional funds but could use the returned money from a previous project.

Still not adding money to Estateguru. but nice to see that they’ve hit record volumes. Now, if only that secondary market appeared so that I could exit as a private person. Moneyzen sadly still doesn’t have a license to give out additional loans, so there’s that.

Social lending portfolio (March, 2016)

Honestly, so many things were happening in P2P in Estonia in March that it was difficult to keep track of everything. Overall, big numbers, some chaos and interesting future perspectives would probably describe the month. Overall, I just got back from London and it was an experience in how far behind we are when it comes to investing being mainstream – you can hardly look anywhere in central London (or on the metro) and not see some sort of advertising for investing. Things are hopefully changing here as well, though.

Bondora personal portfolio

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I’ve started the process of wrapping up my private portfolio, which can be seen from the dip in interest earned (below 100€ for the first time in 6 months). What this means is that I am selling off defaults and old mispriced loans, that I want to get rid of. Current plan is to sell off the not-so-great parts of my portfolio within this year, and then do a sale for the better loans next January (so the tax obligation would arrive mid-2018).

Overall I think it’s a reasonable plan because 1) secondary market is so slow at the moment that I don’t want to dedicate too much of my time to selling things 2) selling good EST loans at a premium won’t be an issue, so I might as well let them pay as they are, and then sell the ones that are too far from deadline once I actively pull out. I’ve transferred out 1K of money, which is going into stocks since it’s money invested as a private person.

Bondora business portfolio

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For my business portfolio, I am a bit torn. Bondora is not the highest returning part of my P2P portfolio (Omaraha is), however Omaraha is unable to offer enough volume and lacks a secondary market. So it seems that Bondora will have to remain the biggest part of my portfolio at this point. There was a slight dip in interest returns since last month a lot of the loans started with frontloaded interest payments, it should stabilize out and start climbing now.

Omaraha portfolio

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As time goes on, I have to admit, I am liking Omaraha more and more. It is clearly currently top when it comes to returns, since I haven’t had any defaults yet. However, they recently announced that all new defaults will have a buyback at 80% of principal value, which means that the potential loss isn’t immense – especially since most of my loans (90%) are 900+ (the highest) credit group. Looking rather stable, and aiming to get to 100/month in interest earned by some time in autumn. Will see, depending on how I manage the different proportions – adding money to Omaraha is heavily dependent on their volume of loans. I mostly just add money when what I have on the account has run out.

Mintos, Twino, Viventor

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I’ve essentially given up with my idea that Mintos could offer reasonable short-length loans and slightly replayed the proportions between Twino and Mintos. Of course, Twino has been slightly confusing this month, the biggest problem being that the autobidder is slightly broken at the moment. Viventor finally managed to get theirs working though, so there must be balance in the universe 😉

Currently Twino/Mintos stand equal in my portfolio (just added the money into Mintos later, which is why the interest returns lag). For Viventor, they seem to be doing OK, so I will probably add in a couple of hundred extra there just for their 1-month length loans. Mintos’s offers of 13% consumer loans and 13,5% car loans means that even though I’m not a fan of the loan lengths there, it does slightly pull ahead in the race of the Latvian platforms at the moment.

Crowdestate

I have this dream, that one day CrowdEstate’s IT system will work as intended. At this point it seems like they are still suffering from issues when a new project releases, which made this project fun – since I was in London I had to find a Starbucks for wifi and then suffer through the horror of using their website on my mobile phone. I really want them to do well, but issues like this take away a lot of goodwill that investors would otherwise have.

Estateguru, Moneyzen & Investly

Estateguru is impressing with volumes, however as stated before, not adding any money currently since my portfolio there is private (no word of a secondary market for a long time now).

Moneyzen did not manage to get the new regulatory license on time, which means that no new loans are being given out. Which makes me reasonably happy that I ‘only’ have 500€ there, but it’s not being reinvested, so not good overall.

Investly seems to have gotten their pipeline for factoring (invoice selling)  going, there seems to be a reasonable amount of invoices listed, which is making me consider actually finalizing my registration and testing them out.