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  1. #16
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    Major concern is this is brand new territory....who knows what may happen or could happen. I'm sure that there have been safeguards written in but nothing has been tested or put under pressure so outcomes are completely unpredictable the fact that the FMA has some oversight wouldn't allow any peace of mind in my opinion.
    P2P lending may be new to NZ but it has been operating in other countries (UK, USA) for some years. Looking at some of the overseas P2P sites you can see similarities with the NZ companies in the way that their sites look and the language that they use. For example, here is Mr Money Moustache's experience of Lending Club after one year

    I'd suggest that the NZ sites are merely following (hopefully) best practice of the companies who have been doing this for a while. Time will tell.

  2. #17
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    While I do like the concept of P2P lending immensely and wish it every Success, now that there is a thread on whether it is an investment , it has clarified my thinking on the matter.

    Certainly neither buying shares in a P2P vehicle or lending money to borrowers via a many to many platform could currently be considered of investment grade. None of the vehicles operating have been around long enough - the models aren't proven.

    But are they investments? Of course they are though I would place them very firmly in the high risk category, essentially junk.
    The reason for this in my opinion is that the theoretical benefits obtained from loan diversification will be negated by high failure rates, and especially high failure rates during periods of stress.
    its exactly the same principle as the securitisation of low,quality mortgages a la the cause of the GFC. Having lots of them all bundled together doesn't magically turn them into AAA.
    For clarity, nothing I say is advice....

  3. #18
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    Quote Originally Posted by peat View Post
    Havking lots of them all bundled together doesn't magically turn them into AAA.
    Which is why interest rates are above 5%! Average return is about 15% which corresponds to your statements.

  4. #19
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    So where is the "strategy" in P2P "investment"? Most investors have some sort of strategy when they invest...and in fact the thread where this sitting is called "Investment Strategies". How can you align lending money to individuals with a strategy? There is no strategy, no intellectual involvement, no examination of company performance and prospects....just an examination? of likelihood that joe borrower will pay back his loan.
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  5. #20
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    Agree...it is not a AAA loan if the borrower is 21 year old borrowing money without security for an overseas holiday. The interest rate will be high to reflect the risk. Would it be justified to call that usurious?

  6. #21
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    Quote Originally Posted by BIRMANBOY View Post
    So where is the "strategy" in P2P "investment"? Most investors have some sort of strategy when they invest...and in fact the thread where this sitting is called "Investment Strategies". How can you align lending money to individuals with a strategy? There is no strategy, no intellectual involvement, no examination of company performance and prospects....just an examination? of likelihood that joe borrower will pay back his loan.
    I think, in a balanced portfolio it fills a risky place. I think there is probably more thought that goes into the decision to invest in a P2P than would go with the decision to invest in a Big Bank term deposit or even perhaps even in a company bond issue. Maybe there is thought that goes into deciding which P2P and from thereon reliance is placed on the P2P company's assesment of grade of loan. (Just as you rely on the Big Bank's assessment on how they deploy the funds provided by your term deposit).

  7. #22
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    Quote Originally Posted by Colgar View Post
    Don't you mean lenders point of view?

    Also, how would you describe each operators model in a sentence?
    Yep lenders, borrowees is bad english.

    this post is a start, it shows what they disclose, on each operators model. I hope to add to it.

  8. #23
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    Quote Originally Posted by BIRMANBOY View Post
    So where is the "strategy" in P2P "investment"? ...
    With Harmoney the average age of an investor is 41yo (https://www.harmoney.co.nz/assets/Pe...stors-info.png). I think that is quite a low average age for an investor. Part of the reason may be the online platform would be more comfortable for younger investors. However, I remember a Harmoney spokesman said in an interview that many of its investors were people saving for a house deposit. So I think that given the current housing market with prices appreciating more than the rate of inflation, many investors are people seeking returns higher than term deposit rates. So their investment strategy may unfortunately be tinged with desperation, perhaps reflecting the current housing affordability for first time buyers trying to raise a deposit.

  9. #24
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    Quote Originally Posted by Bjauck View Post
    With Harmoney the average age of an investor is 41yo (https://www.harmoney.co.nz/assets/Pe...stors-info.png). I think that is quite a low average age for an investor. Part of the reason may be the online platform would be more comfortable for younger investors.
    Thats part of it. The other thing is we have already established above that P2P is higher risk, so naturally as you get older, you reduce your exposure to high risk investments. A 65yo probably shouldn't have any money in Harmoney except maybe the A and B loans.

    I cant see how you can save for a house deposit in something with a 3y liquidity timeframe.

  10. #25
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    Quote Originally Posted by Harvey Specter View Post
    Thats part of it. The other thing is we have already established above that P2P is higher risk, so naturally as you get older, you reduce your exposure to high risk investments. A 65yo probably shouldn't have any money in Harmoney except maybe the A and B loans.

    I cant see how you can save for a house deposit in something with a 3y liquidity timeframe.
    As you get older you should reduce the percent of your wealth in riskier assets, however your wealth, in many or most cases, increases as you become older, so the total amount invested in riskier assets may actually increase.


    I guess if you have a plan to buy a house in say 5 years time, it would allow you to invest for about a cycle or two in P2P loans and allow access to the funds for when you are in a position to look for a property. I see Harmoney are still pushing the "P2P saving for a first home" line. https://www.harmoney.co.nz/blog/saving-for-first-home " The benefit for investors, and first home buyers trying to grow their deposit faster, is that the return on your investment is considerably better than the return offered by high-interest bank accounts, meaning you can save up for that deposit faster."

  11. #26
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    Quote Originally Posted by AppleCrumble View Post
    every investment there is always a bit of a gamble... loto, hoseracing, stocks , property

    p2p - I do think it is an investment. It is providing money in return for a risk weighted return.

    Like other investments it also has the other factors like it is not very liquid, in that your money is pretty much tied up for the term.
    your initial investment/principal wont grow which is analogous to no capital gain
    you do get monthly, or periodic, repayments which is your cash flow.


    Overall I do like the idea of p2p as in principal it puts peeople with money together with people who want money and are willing to pay a charge on top.
    This in a way cuts out the middleman(the banks) which I like but unfortunately you still need a middleman(harmoney,squirrel...etc) to take their cut.

    From a borrowers point of view, I would only use the p2p if it was cheaper and more accessible than going to the banks. But then there will always be people(with the higher risk profile, people who can't go to banks) who would normally go to the 2nd or 3rd tier finance companies for their loans. I guess p2p is competing with these also.

    From a borrowees point of view they can put there money in for a certain return. And this return is clipped by the middle man. But it can be diversified enough to sprea the risk.

    It will be interesting to see the longterm of these p2p companies, but if the us and uk is anything to go by it seems like they might be here for a long time.

    Also interesting is the different operators all have different models.
    Lending Crowd
    Harmoney
    LendMe
    Squirrel Money.
    As I see it, NZ has not got the population of investers to support the 4 companies mentioned and so far it seems to me that Harmoney has stolen the march. Lending crowd should be a little more secure than Harmoney but at this stage I have found it moving along too slowly. It has taken me 2 weeks to invest in 4 loans as a trial. I was considering transferring funds from Harmoney to LC but have changed my mind.
    Squirrel has just mentioned that they have $1.7m now out in loans. That's way behind Harmoney's first month.
    Can't comment on Lend Me, haven't been there.
    The successful P2P's in the UK and US are doing well and I hope one or two of ours do also but I can't see them all doing well, the pie's not big enough to feed them all.
    Soolaimon

  12. #27
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    Quote Originally Posted by peat View Post
    While I do like the concept of P2P lending immensely and wish it every Success, now that there is a thread on whether it is an investment , it has clarified my thinking on the matter.

    Certainly neither buying shares in a P2P vehicle or lending money to borrowers via a many to many platform could currently be considered of investment grade. None of the vehicles operating have been around long enough - the models aren't proven.

    But are they investments? Of course they are though I would place them very firmly in the high risk category, essentially junk.
    The reason for this in my opinion is that the theoretical benefits obtained from loan diversification will be negated by high failure rates, and especially high failure rates during periods of stress.
    its exactly the same principle as the securitisation of low,quality mortgages a la the cause of the GFC. Having lots of them all bundled together doesn't magically turn them into AAA.
    I think you've nailed it and are seeing very clearly. People's investments in finance companies generally ended in tears when the pressure really came on and many of the finance companies loans had reasonable security. Simple logic suggests with much of this lending being unsecured, potentially the outcome could be much worse. This is a brave new frontier of commerce that's not for the faint of heart that's for sure !

  13. #28
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    Interesting article "The State Of P2P Lending" http://techcrunch.com/2016/01/30/the...f-p2p-lending/

  14. #29
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    Quote Originally Posted by Baa_Baa View Post
    Interesting article "The State Of P2P Lending" http://techcrunch.com/2016/01/30/the...f-p2p-lending/

    Extract - JP Morgan recently announced a partnership with OnDeck Capital that will allow it to outsource to the OnDeck platform business loans under $250,000.

    In NZ large proportion of Harmoney loans are made by Heartland and a hedge fund whose name escapes me.

    Hardly Peer to Peer is it
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  15. #30
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    Quote Originally Posted by winner69 View Post
    Extract - JP Morgan recently announced a partnership with OnDeck Capital that will allow it to outsource to the OnDeck platform business loans under $250,000.

    In NZ large proportion of Harmoney loans are made by Heartland and a hedge fund whose name escapes me.

    Hardly Peer to Peer is it
    Good point, it is an inconvenient truth that just by virtue of deploying a genuine P2P platform, major funding sources are the same institutions that might make it difficult for the desperate and needy borrowers through normal banking channels. A way for the bank to conduct higher risk lending with low costs of engagement. In a sense is it B2P (bank 2 person) via a 'low doc' 'low cost' channel. I wonder about when the quantum of low doc loans reaches a marketable 'book' whether the modern equivalent of CFD's will emerge and the book 'sold' into the musical chairs money-go-round until it is held by the institutional party least able to sustain the risk of default.
    Last edited by Baa_Baa; 01-02-2016 at 09:45 AM.

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