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Thread: Harmoney

  1. #4151
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    Thanks Myles. It has been a while since I thought about this but I think the rules of thumb be it 100 or 200 etc are focused on not making a loss rather than providing confidence intervals around expected returns. Seems like about 1000 loans are required to practically remove random volatility of returns. And that's per grade not total portfolio. An impossible task given current listing numbers. I've posted this article before but it's still thought provoking https://www.lendingmemo.com/risk-div...n-p2p-lending/

  2. #4152
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    Harmoney to raise 25 Mill this year...

    https://www.interest.co.nz/banking/9...says-peer-peer

  3. #4153
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    Quote Originally Posted by Saamee View Post
    Harmoney to raise 25 Mill this year...

    https://www.interest.co.nz/banking/9...says-peer-peer
    Pity we can't participate!

    I think it used to be a good deal more than 57% of applications rejected but maybe that reflects better algorithms?

  4. #4154
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    Anz has recently started reporting more information to credit reporting agencies. This can have a substantial affect on credit scores and will help improve their accuracy. Harmony relies heavily on prospective borrowers credit rating for loan grading purposes. So you would expect, given ANZs market share, that loan grading will now be more accurate from Harmoney.

  5. #4155
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    Quote Originally Posted by RMJH View Post
    Pity they don't provide specific usable advice
    They probably can't because that would likely be considered financial advice and there are various rules around who can offer financial advice.

  6. #4156
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    Quote Originally Posted by Wsp View Post
    They probably can't because that would likely be considered financial advice and there are various rules around who can offer financial advice.
    Fair point

  7. #4157
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    Quote Originally Posted by RMJH View Post
    I think it used to be a good deal more than 57% of applications rejected but maybe that reflects better algorithms?
    Yes, they had reported rejecting 77% of applications approx 18 months ago. Forecast default rates were updated in v1.5 around the same time. Subsequently, increased ANZ disclosures to credit reporting agencies should have helped better inform the credit ratings of borrowers, but has Harmoney vetting and reporting improved otherwise? I am not sure.

  8. #4158
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    Quote Originally Posted by RMJH View Post
    Seems like about 1000 loans are required to practically remove random volatility of returns. And that's per grade not total portfolio.
    Simply out of interest, the following two graphs are ones I use to 'track' my portfolio and may offer some insight into 'volatility' of loan value vs defaults:

    grades.jpg
    CRAR is my calculated return on current loans - this shows the movement over time of the calculated rate of return of my approx 1000 current loans. Obviously the higher risk grades are more volatile. [A and F grades not shown due to low numbers.] I really don't think it would be possible to provide detail on the number of loans you should invest in for a stable return as loan selection plays such a large part.

    watch.jpg
    Harmoney's arrears value on the left green/brown plot (I don't have much faith in it as I've never been able to work out how they work it out...), charge off value on the right orange plot. From what I can tell Harmoney can often process charge offs in 'lumps', hence the 'chunky' graph.

    Note: maturity of portfolio has an impact.

    Over Diversification: One thing I forgot to add was that I think over diversification is a real 'thing'. If too high a number of loans is aimed for, you tend to start reaching for loans either outside your risk profile or perhaps loans that are best left alone, just to ensure a large spread (diversified) set of loans. This will very likely reduce the value of the loan set and increase the volatility of the overall portfolio.
    Last edited by myles; 08-03-2019 at 03:23 PM. Reason: Over Diversification:

  9. #4159
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    Default Should FMA renew Harmoney's P2P license for a further 5 years or longer term?

    While returns to date from Harmoney have been comparatively good for all investors - big and small, Harmoney is showing a growing propensity to sideline the core peers so it can play with the big fish. Retail investors have recently become increasingly forced to withdraw their invested capital, as it has been repaid and has sat idle for months while wholesalers were being filled. In a P2P theatre, why is institutional money being prioritized over retail? While Harmoney's loan securitization may be good for NZ Debt sector, how is it good for the kids if their pocket money has to be choked off so Mama Harmoney can send a packet over to affluent Uncle Benz?

    If Harmoney wants to behave like a Non Banking Financial Institution, ignoring its loan volume and loan quality obligations to its core peers while paying lip service to them, perhaps it is time it operated and fulfilled its obligations under a more appropriate license. If I were FMA, I would NOT renew Harmoney's P2P license UNLESS it committed to:

    1. Directing at least 51% of its loan volume to retail peers, keeping within the spirit of its license
    2. Maintaining at least loan quality equanimity between its retail and institutional investors

    I would also certainly NOT renew Harmoney's P2P licenses for terms any longer than annually for the time being, until I was satisfied that Harmoney had learnt to respect its P2P license terms.
    Last edited by beacon; 10-03-2019 at 09:43 AM. Reason: Added the word: affluent

  10. #4160
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    What are the risks to existing investors in the case where Harmoney loses its license? Would Harmony close up shop? What are implications to existing loans outstanding and their lenders?

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