1.7% cash return in July
In July, our P2P portfolio return generated 1.7% in cash return. Total return for this year is close to 12%. Performance is the good news. The bad news is that we can’t reinvest easily due to the disruption in p2p lending as a result of new MAS regulations.
4 loans missed their repayment in July. Several of the borrowers were previously late in repayment, but are still making some form of partial payment.
Disruption in lending
MAS regulations is forcing the three platforms that we use most – Funding Societies, Capital Match and MoolahSense – to temporarily suspend their retail p2p lending activities. As a result, our p2p portfolio is likely to run down over the next several months.
In other words, we will still be getting our cash returns of around $2,000 per month (comprise interest and principal) per month. But we will not be able to reinvest this cash into new loans.
MoolahSense introduced an unlock feature as a way to fulfil the “private placement exemption” for retail p2p lending. However, investors need to pay a $1k unlock fee rebateable on making an investment of at least $3k per loan. This feature may suit investors with deep pockets, but does not appeal to us. We’ll pass.
We recently started invoice crowdfunding with Capital Match. Capital Match’s invoice crowdfunding structure carries some platform risk because it is executed through a derivative contract and the seller’s identity is not disclosed. Nonetheless, we’re giving it a try after observing their invoice deals for quite some time. We’ll give an update soon after we receive returns on our recent deals.
We’ve also put some money into Indonesia loans with Crowdo. The pros are that the Indonesia loans are collateralized and investors need not be accredited. The cons is that there is fx risk. For its Singapore’s operations in debt and equity crowdfunding, Crowdo still requires investors to be accredited.
Coming up next…
This sudden disruption in lending is forcing us to look at several new options to reinvest our money. As always, risk management is our top consideration.
We are doing a lot of due diligence work now on new platforms and products such as Crowdo, invoice crowdfunding and others.
We’ll share our insights soon. Stay tuned!
EDIT: 6-Aug-2016. The Crowdo paragraph is amended after feedback from readers. The CMS license it has applies only to its Singapore operations.