Mintos portfolio 2,5 years

Since Mintos has once again opened up their refer-a-friend and more people are looking for info on Mintos experiences, then I thought I’d do an update on my Mintos portfolio. For the first two years Mintos was mostly a small part of my P2P investments. Solid, but there were other alternatives I preferred (Omaraha at the time).

As time went on, Omaraha became less attractive due to lower returns and Mintos much more interesting due to cashback being offered. Since I sold my rental apartment and needed an option to invest the money short term, then for the last 6 months Mintos has been the biggest part of my portfolio.

This is the chart of my interest returns across two years – you can clearly see the *bump* from when I added in the money from the sales of the apartment and when I started to trade more actively on the secondary market (cashback being offered also offered bigger volumes for the secondary market).

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This as stated is interest returns – interest + late fees. This chart does not show cashback returns, which aren’t really repeatable at this point – since no campaigns are running, but cashback has effectively helped this year’s Mintos returns hover at about a 20% return. Cashback rewards + secondary market profits together are almost as big combined as all of my interest returns.

Overall, I’d say Mintos has definitely surprised me in a positive way when it comes to their growth rate and the pace at which they add loan originators. While I can’t keep my portfolio at this level for much longer since I need to cash out from some investments, but I feel comfortable having a significant amount of money invested with them.

Overall the only small issues I have with them are 1) it’s still somewhat slow to deposit money (some hassle with them switching providers as well), 2) maybe sometimes slow on updates (such as Eurocent case) and 3) somewhat difficult to assess originators for an investor (I only invest in a handful of the 40) and 4) at times customer service struggles with more complex questions. Most of these are fixable issues though.

Other than that, they’re more transparent than most P2P portals, sharing relevant info (yearly report) which should interest all investors, and as they are profitable I feel that a lot of risks are mitigated by that. No big issues so far over the 2,5 years I’ve invested with them.

 

 

Mintos cashback vol 2

A bit more than a week after last Mintos cashback bonuses were paid out, another cashback program (actually two of them) was announced. Since I’ve seen some investors seem confused about the value of such a program, I thought I’d discuss it a bit. So, why offer a cashback?

  1. The obvious – bring in more money

As I predicted in my last post, the cashback pushed people to deposit more money, Mintos finished December with 46,9 million euros worth loans financed. This means more money for Mintos instantly (since they earn money based on the volume of loans financed), and a bigger growth push for them (since people who deposit money will not withdraw it instantly after the program is over).

2. The less obvious – encouraging long term commitment

I personally know a lot of people who invest in Mintos but only choose short term loans since long term loans seem too scary. What better to help people overcome mental hurdles such as this (taking on more long term risk) than extra money? Once people have dared to invest into longer term loans once, then once they have them in the portfolio it’s easier to add more long term loans (If you’ve already taken in 60mo+ loans then some more 12+ month loans seem less scary than having to “jump” from 1-3 month loans).

3. The practical – the money remains in the portal for a bit at least

Once you’ve invested into long term loans you can’t just instantly jump out again. Either the loan has to finish (take a long time), it has to get bought back for some reason (unpredictable) or you have to sell it on the secondary market. To sell on the secondary market someone else has to buy it – meaning other investors are likely to bring in more money. Or, if you’re in a hurry to get out then you’re likely to sell at a discount, and everyone is happy (other investor gets investments cheap). You can already see people selling BBG loans at a discount after having cashed in their discount.

4. The logistical – easier to manage

If an loan company (or Mintos) wants to increase amount of money from investors then logically you would have to increase interest. For long term loans a slight increase in interest is problematic since for a long term loan that comes to a large amount of money. If you list loans with the same interest rate as before, but offering a cashback it’s easier to manage (get to predict volume) and investors are less frustrated if loans get bought back later. It’s also more instant – increased interest rates will not motivate people to make deposits as quickly as a time-limited cashback offer.


 

Overall, since I’ve been investing into mogo loans for most of my Mintos career then for me the buyback is a nice bonus to have. I even sold some older loans at a bit of a discount to benefit from the cashback (I was interested to see that people were actually buying!). Some people are probably still a bit too scared to take in such long term loans, but, well, more left for those who pick them.

Mintos and Twino portfolio updates

Mintos and Twino portfolios are both steadily trekking on, and being probably the most passive part of my portfolio still. I kind of refer to them as my latte fund – my investments there are enough for me to afford a latte every day of the year, the worst financial sin in the eyes of some savings gurus :) Of course, I don’t actually drink a latte every day because I’m too lazy to actually go and get one, but the point still stands. Next goal for these two portfolios is to allow me to buy a Starbucks coffee every day. I’ll probably fill that goal before Starbucks actually opens a shop in Estonia!

Portfolio growth

Since I’ve been saving up money for a house downpayment, then I haven’t really been adding all that much money into my portfolio this year, and I’ll be a bit less aggressive with adding money until the house is ready and decorated and all those other million expenses that go with moving. However, both Mintos and Twino portfolios are slowly doing their thing, and I’ve started to add tiny amounts of money to my Mintos portfolio again.

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I’ve stopped adding money to Twino due to the fact that for a couple of months there was a constant cash drag issue, where there weren’t enough new loans with attractive rates to really justify adding any money. If they get their pipeline going better again, I might reconsider, but I currently have 3500 euros floating around there, bringing in about 35 euros/month, so it’s a nice and slow growing portfolio.

Mintos however is really showing impressive growth, both in terms of loan volumes and amount of originators, being well on the path of becoming a P2P market leader in Europe. While I’ve been quite liberal with my autoinvest settings in Mintos, then about 90% of my Mintos portfolio is still mogo loans, which have served me well. Currently I have 4400 euros circling around, bringing in about 45 euros/month, so also a nice passive portfolio.

Returns

Now, returns are however on a different track and instead of climbing upwards they are steadily declining. This is inevitable as more money pours in to P2P, and there is more competition in the field. Currently Twino returns show as 13,42% and Mintos returns show as 13,03%.

As time goes in, I expect both of them to balance down to about 11-12%, which is still impressively good for such a passive investment. I literally just transfer money in whenever, and don’t really even log on to check the results all that often.

The only interesting thing in the past few months has been the fact that since Eurocent is struggling, I’ve checked occasionally how my one Eurocent loan (22€ loan piece) that I’d managed to pick up is doing. I’ve also pushed my Twino portfolio to be abit more towards shorter term loans, bringing the average length down, now that there aren’t much BBG loans anymore.

Twino status:

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Mintos status:

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How many P2P portals to include in your portfolio?

Since there is a significant amount of P2P portals now available compared to a few years ago, the question quickly arises – how many portals should you include in your portfolio? Is it better to focus on just a few portals, or should you attempt to diversify and reduce risk by including a large amount of portals? How does this change when the total sum of your investments gets bigger? Are there downsides to diversifying?

My current P2P portfolio

As time has moved, my P2P portfolio has changed a lot. I started, like many others with 100% Bondora, but have now completely exited it. I also tried Moneyzen, Viventor and Estateguru, which I’ve also not kept in my portfolio. It definitely took me a while to figure out a selection I like, and it’s constantly changing in time. Currently the balance is as follows:

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P2P investments currently make up 47% of my whole investment portfolio. This means, that from my total portfolio the rates are: OR 24%; CE 13%; Twino and Mintos ~5% each. As you can see the exposure to Omaraha is rather big, the exposure to other portals is significantly less.

Liquidity

As with all investments, something to consider is liquidity. With P2P investments liquidity mostly comes from two aspects – firstly the length of the projects/loans (for example Twino’s 1-3 month loans vs Omaraha’s 5 year loans) and secondly the availability of a secondary market (and the speed of trading there).

For me, I’ve decided that for now, liquidity is not a huge priority for me, which means that I’ve allowed my portfolio to move towards longer term locked-in projects. Omaraha does not have a secondary market, and while defaulted loans have a sell-back function, it’s still a rather long term investment. CrowdEstate is also a long-term prospect, since while the projects are generally 1-2 years in length, the portal has a right to extend the projects and there is no secondary market to allow for an exit.

However, a part of my portfolio I’ve still kept rather liquid and this part is carried by Mintos and Twino. With both of these portals, I can easily pull out money from in a matter of days, so if for some reason I need to move money to another investment, or have need for cash, then this portion of my portfolio allows me to do this.

Risk

Now, assessing risk is a tricky thing in the P2P business. While you can look at overall history of the portals, a lot of them are new enough to not have much of a track record. Both Twino and Mintos in theory should be relatively low risk, however since Mintos has at least one loan originator that’s in trouble (and might go bankrupt), it’s clear that things can still go wrong.

The most ‘stable’ part of my P2P portfolio is probably Omaraha, due to the length of experience they have, and the overall stability of the market. However, Omaraha is also prone to all kinds of radical changes (such as the interest cap instated last week), which means that the portal risk itself might influence your long term strategy.

Crowdestate is clearly the most risky part of my P2P portfolio at this point, due to both the type of investments (mostly real estate development projects) and the risk of the real estate market overheating. This means that I will not really allow the volume of investments to increase too much there, I’ve mostly hit the point where I reinvest returned money, and add in less than I used to.

Time expense

With every new P2P portal that you add, there is both an investment of time and money. You need to invest time to figure out how this particular portal works, and how to achieve the best results. Depending on the portal this might require quite a bit of tinkering. For example, Omaraha has been offering great returns, but the time investment in managing interest rates there was also quite a bit of work. In comparison to Mintos or Twino, where you could pretty much just cruise by, using the autobidder function.

Since I invest though my company account, then any new portal also means more bookkeeping, and additional tracking. This means that there isn’t really much point in adding in a portal just to put a couple of hundred of euros into it, it becomes reasonable to add in another portal once the investment is in the thousands already. This means that while I’m currently at 4 portals, it’s not unreasonable to add in a fifth, there just has to be a reason for it – either it offers some different level of liquidity; there is a significantly different risk profile (different sector, country etc.), or an attractive risk-reward ratio.

How have you divided up your investments?

Fraudulent loans in P2P – Omaraha example

One of the inherent risks of the lending business is the likelihood of fraud happening. People will always be motivated to try to get loans and not pay them back, and this isn’t something that’s limited to P2P – banks and other credit providers constantly try to improve their systems to stop fraud from happening.

However, when it comes to P2P a lot of portals have been rather tight-lipped about giving out any actual statistics for loan fraud, which is strange in the sense that it’s unlikely that no fraud has occurred. I remember from when I started out with Bondora, then the forums occasionally discussed some fraudulent applications, since back then it was possible to track the people you gave loans to because a lot of the borrower’s info was public.

Since then, when looking at Bondora defaults, then for quite a few you can see marked as “criminal proceedings started”, which implies fraud, whether it was giving false data, using someone else’s ID etc. For an investor this means that unless you are phenomenally lucky then you will at some point lose a bit of money to fraud.

Omaraha, the Estonian P2P portal had an interesting case happen, which hasn’t gotten a lot of attention, and to be honest if people weren’t diligent about their portfolios then I’m not sure if it ever would have been public info. Essentially, there was a dozen or so loans that were given out to Latvian borrowers, which in all likelihood used either fraudulent data or some other tricks to get through the system.

Obviously, it’s reasonable for Omaraha not to give out exact details which workaround was used to trick the system, but the fact being – in the range of 50 000 euros (+/- 10K) was lost to this one wave of fraud. Due to the way Omaraha’s system works, 80% of that will be absorbed by the recovery fund, and 20% will be lost for the investors. I was one of the people who managed to get lucky and hit quite a few of those loans with my autobidder, so I’ll be taking a loss in the range of 100 euros from this venture.

Now, why this is important other than the fact that it’s of course sad to lose the money; is the fact that this is an inevitable part of investing in to loans. No system is absolutely foolproof, and workarounds will be found. As an investor it’s your job to take that into account when planning your strategy  – the knowledge that at some point such losses may happen. For portals this is always something that would be nice to transparently explain, to provide investors with more confidence in the due diligence they do.