2018 YEAR IN REVIEW - PEER-TO-PEER LENDING
We at Fiscal Frontiers are not investment advisers and our only goal is to report to you on the performance of investments we have made so that you can consider our experience along with all the other information available to make an informed decision on what is best for you. Peer-to-peer loans are inherently risky and all of a particular loan could be lost.
2018 was an exciting year here at Fiscal Frontiers. For starters, it was our inaugural year. October 4, 2018, marked our very first post, and throughout the rest of the year we invested in a plethora of strange and exotic things. We hope to add more to our portfolio in the future, but for now we are happy with our mix of peer-to-peer (P2P) loans, crowdfunding, crypto currencies and robo investors.
The purpose of this post will be to update you on how our peer-to-peer investments performed. We currently have funds in two different platforms: Lending Loop and Mintos Marketplace. Both of these services have a treasure trove of information available, but we don’t want to overwhelm you, or ourselves, in this post, so we have done our best to keep things simple here. If there is any information you want to see, let us know in the comments, in a message through this site, by email at email@example.com or on twitter @fiscalfrontiers.
Before jumping in, if you'd like to learn more about P2P lending, then you can read our earlier posts providing A Brief History of Peer-to-Peer Lending and explaining The Canadian Peer-to-Peer Lending Landscape. Without further ado, let's get to the results.
THE BIG PICTURE
We cannot really do a fair comparison of Lending Loop and Mintos for 2018, because the accounts were open for significantly different amounts of time. Our Lending Loop account was opened and funded on September 12th, and its first loan entered repayment on October 18th. In contrast, our Mintos account was opened on October 31st, but not funded until November 13th (owing to wiring Euros from North America to Europe), with its first loan entering repayment on November 23rd. Bearing these differences in mind, it is still good to take a high-level view of how they both did in 2018:
I expect the above numbers to all improve now that both accounts are set up and on autopilot, reinvesting income. We look forward to seeing if these numbers increase in 2019 or if defaults weigh them down. But before we get ahead of ourselves talking about 2019, let’s do a deeper dive on how each account did in 2018.
If you are interested in investing in Lending Loop, then you can click this link to earn an additional $25 once you lend your first $1,500 on the platform.
We committed to our first loan on Lending Loop on September 12, 2018, and while it took a good long while to completely get all of our $1,000 invested, in $25 increments, we finally invested into our 42nd loan on December 28, 2018 (the extra 2 loans came from payments on the first 40 or so loans that had accrued by the end of the year). As of December 31, 2018, the composition of our portfolio looked like this:
And in the 75 days commencing from when our first loan had a repayment event, we made $19.47 on our $1,000 investment:
By and large, our principal was in good hands with Lending Loop. the chart below shows that the vast majority of our principal was fully paid up at the end of the year. Notice the little bit of red at the top of the D loan grade column below. This was the only loan principal that carried over into 2019 being unpaid.
This was a missed payment of $0.77, $0.43 of which was principal. This loan has been the one truly troublesome thorn in my portfolio’s side. It is a loan for $25 to a construction company that has had 2 scheduled payments. The first payment was 9 days late, and then the second one, which carried over into 2019 unpaid, was 26 days late.
However, just because there was only one loan that was unpaid at the end of the year, does not mean everything was peachy keen. The below table shows the percentage of on-time vs late payments for the period in 2018 when we had an open Lending Loop account.
In total, there were 77 payments due, 17 of which were late to some degree. If we remove the two payments from the problem loan, to get down to 15, then we are happy to report that all of those late payments were cleared up within the first 1-15 days of being late (on average 2.5 days). Still, it will be interesting to see how this evolves over the coming months and years.
If you are interested in investing in Mintos, then you can click this link to receive 1% cashback on your average daily invested balance over your first three months.
We committed to our first loan on Mintos Marketplace on November 14, 2018, and, unlike with Lending Loop above, we filled out a portfolio basically instantly, purchasing 97 loans at €10 apiece. As we have pointed out in earlier posts, Mintos and Lending Loop are very different platforms. Lending Loop focuses on long-term loans to businesses for relatively high amounts (on Lending Loop our smallest loan is for $30,000, but the average is roughly $90,000, and the shortest duration is 2 years).
Mintos, on the other hand, has a lot of personal loans, for oftentimes small amounts (under €100), for periods as short as 10 days. Further, there are many opportunities for borrowers to pay out their debts early. Based on all of this, there is a dizzying amount of activity in our account and while there is a tremendous amount of information, it can be tricky to track and report on that information. That said, we have done our best to get a snapshot of what the account was like at the end of 2018.
As of December 31, 2018, the composition of our portfolio looked like this:
And, in total, we made €6.94 on our portfolio over the 39 days from when we received our first payment. Our income looked like this:
While the income in the above table is on an upward trend, something that was starting to concern us at Fiscal Frontiers was the amount of missed payments, which seemed to pile up relatively fast on Mintos. By the end of the year, we had €966.02 of outstanding principal, with about 27% of it being in its grace period or actually late. Looking at the chart below, shows the problem more clearly, with paler blue being later:
However, upon digging into the characteristics of our portfolio, we have breathed a sigh of relief. Currently, 100% of our loans have a buyback guarantee. What this means is that if the loans are delinquent for more than 60 days, the issuer will buy them back from us, which means that our principal is not actually imperiled right now. We may miss out on some interest, but we should not go into the hole.
Thanks for joining us this week as we took a look at how our peer-to-peer investments performed in 2018. Join us again next week as we take a look at how robot managed investment accounts performed.