MoneyZen portfolio, 12 months

By the end of August I will have been investing into Moneyzen for a full year, so it was time to make a decision about the future plans for this part of my portfolio, especially since it’s currently competing against Estateguru in terms of contributions.



Changing strategies?

Moneyzen has, from the start, been struggling with growing their overall loan portfolio at a sustainable rate. Investors have a lot of free money to invest, but they just didn’t seem to be getting the market share that they wanted due to existing competition in Estonia.

Several of the people I know have been waiting for some sort of a fix for this, and I must say we waited for some kind of an announcement to come way earlier. So, this week Moneyzen announced that they are making their loans more easily accessible which is a recommendation that’s been on the front lines of many bloggers’ posts.

They have extended the deadline of loans from 5 years to 7 years making them stand out among other loan provides, and the maximum loan amount has been boosted from 5000 euros to 10000 euros, bringing them up to par with the same amounts that Bondora provides. It’s early to tell if that will make them take more of a market share, but the extended length of loan contracts might attract a different kind of clientele.

Status of my portfolio

When I started investing into Moneyzen my original plan was to add in 50€/month to create a smaller social lending portfolio with a different provider than Bondora, since Bondora was making up a significant part of my portfolio at that point. Soon, however, I realised that the 50€/month was not achievable due to a lack of loans.

Another issue with Moneyzen is that the IT developments haven’t caught up with their ambitions, meaning that the site causes a liquidity problem. You can’t have enough loans to causes meaningful cash flow (which you’d be able to transfer out if necessary) and there is no secondary market. The biggest problem by far though is the lack of overall statistics – a year into investing I’m still not able to tell you at a glance how much money I made in interest last month.


Therefore the decision for at least the second part of this year had to be made. This morning I transferred the last 25€ into Moneyzen for now, bringing the total transfers to 400€ euros, which means 2/3 of my original year’s goal, which I suppose isn’t terrible. (Neither is the close to 40€ interest earned off it.)

I’ll wait for more to happen, mostly:

– less cash drag

– an implemented secondary market

– a bigger market share

– better overall statistics

– recovery statistics (I have 2 defaulted loans)

All the best to Moneyzen, and I hope I have a reason to increase my investments for next year. For 2015 I’m done, I’ll just track how well the money moves, and I guess it can be a somewhat obscure emergency fund type thing that I might have access to at some point in the future.

Bondora portfolio – 2 years

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: 2yearsXIRRWhile 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: 2yearsinterestearnedI 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):

2yearsoldcreditIt 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: 2yearsnewcreditI 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:

2yearsdefaultsAs 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:

2yearsHRloansChanges with my Bondora portfolio

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!

MoneyZen portfolio, 2 months

Several people have contacted me to ask how I’m doing with MoneyZen so I decided to give a short overview. For those of you who don’t know, MoneyZen is a P2P (social lending) platform that’s third on the market in Estonia (following Bondora and Omaraha).

I decided to test out the site by adding in about 50€ per month. Currently my first loans have made their first payments and some are already a bit overdue. One of their concepts is having lower loan interest for premium clients, so having overdue loans is a pretty bad sign. Still, this is what my portfolio looks like right now.

moneyzen2monthsI first wanted to make a very conservative portfolio but you can see that there is a complete lack of 900+ credit group loans, so I had to downgrade a bit. As you can see, the average interest for loans is 17,5% – about 10% lower than my porfolio on Bondora.

Questions and comments I currently have

– The credit scoring logic needs a bit more clarification

– I am not sure if the low interest level really justifies itself

– If you want, then it’s probably easy to give out quite a lot of money since there aren’t that many investors on the platform yet

– Significant work should go into making info easier to see for the investor (it’s not very intuitive right now)

– They don’t have an aftermarket, and there is little or no data on revocery

I’m currently planning to keep investing about 50€ per month, meaning that it will take me until summer to reach 100 contracts, which is a reasonable level of diversification. I am hoping to see active development on their side in terms of information/statistics + an overview of how the recovery system works.


Social lending: diversification by number of investments

I’ve written before about the importance of diversification in terms of being careful about the individual loan sizes and diversification across different social groups.

However, another very important aspect of diversification is the sheer number of investments that you have in your portfolio. No matter how much or how little money you invest, a bigger number of investments always tends to be better because it minimizes many of the potential risks that accompany social lending. If you read analysis based on American P2P lending sites such as Prosper and Lending Club, then you are aware that at minimum you should have at least 100+ investments, and more ideally you should have 200 individual loan pieces.

Estonian diversification data

So far Bondora hasn’t really given out data on the impact of diversification on your portfolio, but digging around their blog I came to a very informative table about the impact of diversification that you can see below:

contractamountSource: Bondora official blog

Essentially looking at the numbers you can see that at lower diversification levels both your potential overall returns and the average return rate are lower. The level of diversification is also important when it comes to stabilizing your portfolio and reducing overall volatility.

Building a diversified portfolio

Looking into the table above then it’s clear that you should be aiming 1) to hit 100+ contracts as fast as possible and 2) steadily growing your portfolio to reach ~500 contracts. (Beyond that the impact of diversification seems negligible)

Currently entering the market to get 500 loans is quite difficult. Getting in the range of ~50 loans per month should be doable though. This means that to build a well diversified portfolio you should be thinking of adding at least 500€ per month to get 50 or so loans. Of course, building a portfolio takes time, and most people can invest nowhere near that much money per month. Still, it’s entirely realistic to reach that level of diversification within 2 years of slow and steady investing. At 5000€ you should already have a very well diversified portfolio that shouldn’t be heavily impacted anymore by any single loan pieces.

My portfolio analysis

I just hit the 400 loan marker with my portfolio. This means that hopefully by the end of 2014 I will have a very balanced and diversified portfolio that will be highly resistant to any sudden changes.

Currently I’m hovering in the top 10% for overall returns when compared to ther investors in my time and money ranges, so I think I’m doing great overall. Already at this point individual defaults have a barely noticable impact on overall returns, which makes is much easier to worry about them less.


First look into MoneyZen


On Wednesday I had a chance to meet with some of the people working on MoneyZen ( site only in Estonian) which is a new P2P lending platform on the Estonian market. Some thoughts on what I saw/heard:

The strategy

MoneyZen definitely has a very specific strategy thought out. Essentially this means:

– Aiming to be the market leader in quality, not quantity. (The market not being just Estonia in the longer run.)

– Having far more strict background checks than those of competitors. (More information gathered, from clients, so far 3% of loan applications accepted.)

– As a result of better background checks potentially far lower default rates in the long run (The 2% mark was mentioned, which is obviously far lower than that of competitors.)

– Lower default rates and better credit scoring would make way for lower interest rates for high quality clients. (Allowing for loans in the 15%-20% range would allow them to compete with banks for the consumer credit market.)

Potential risks

In typical Estonian fashion, let’s start with the things to worry about:

– The market in Estonia is quite full of different consumer credit providers who offer a similar service for higher interest, but also with higher speed/less hassle

– Competing with banks is a bold strategy that might not pay off in the long run if the banks really decide to step it up in the consumer credit market

– As with any starting business, there is a certain level of operational risk that comes from both being new to the market and lack of experience; unexpected things can always happen

– It is clear that we’re not talking about a bootstrapped business here yet, so the risk is there

What I personally liked

– The people involved in the business really believe in what they’re doing. I know that this might be a weak rational argument, but it will definitely play a non-trivial part in the success of the business. The fact that the CEO is planning to invest into every loan shows a certain level of belief (and/or insanity).

– The way they’re building relationships with clients and investors is definitely a novel approach to take. Inviting potential investors to visit them and allowing them to ask questions to their heart’s content will generate a lot of goodwill towards them that is nearly impossible to get in any other way.

– Their business plan is beyond the basics of “Oh, this works for others, we want a slice of the pie”, which seems to be a problem with a some of the P2P sites that are popping up. They believe that they have a niche that has not been filled yet, and they might be very right in that.

(- Their office was cool too.)

Drum roll

I must admit, when I first heard about another P2P company a few months back I was a bit skeptical about their chances of succeeding in the current loan market of Estonia. The market seemed to have reached a certain saturation point and with the impending rain of regulations aimed at consumer credit the situation clearly isn’t looking amazing for all loan providers.

After meeting some of the people behind the site I’ve definitely gained more optimism in terms of their strategy and future plans. I’d say if they play it well, they might really succeed in carving out a part of the market for themselves.

Final verdict being that I’m going to try them out to see how it goes. I’ve been meaning to diversify my P2P lending and since Omaraha (second biggest P2P lending site in Estonia) seems to be doing I don’t even know what in terms of their investor relations then I’d happily try a site that’s willing to really listen to investors.

Let’s hope they do well! (And that my investments succeed in the long run.)