P2P Investment Trusts - Market Latest, Plus Site Offer Update


Hello, and welcome back to the working week. We report regularly here on the chequered history of peer-to-peer (P2P) loans as an asset class in quoted investment trusts. Here's the latest.Investment trusts are collective investment vehicle quoted on the stock market. They offer a liquid (quick buy/sell mechanism) way of having exposure to P2P loans. Although investment trusts by definition offer the benefit of spreading risk across a wide variety of assets, the return to the investor can vary,Money&Co. lenders have achieved average gross returns of over eight per cent in the more than five years we've been facilitating loans (over $15 million so far and counting). The annualised default rate is under 0.3 per cent.See this report on investment trusts from our friends at P2P Finance News. The key fact not mentioned in the piece is that the share price is 72.4 per cent (mid-price, time of writing), compared to 100p on launch just over four years ago.

VICTORY Park Capital Specialty Lending (VPC) reported its highest net asset value (NAV) return in six months, thanks to the improved performance of its balance sheet investments.The alternative finance-focused investment trust reported a net revenue return of 0.73 per cent in March 2019, up from 0.46 per cent in February."During the month, the company continued to see positive revenue and capital returns as the balance sheet investments continue to perform," VPC said.VPC has been winding down its underperforming peer-to-peer lending portfolio since late 2016, after losses triggered substantial writedowns. Instead, it has moved more of its capital into balance sheet investments, arguing they typically offer higher returns with less leverage, while the lending platform takes on more risk as it usually takes first loss on loans.The trust hit the headlines at the end of April when it emerged that fund manager Neil Woodford had divested his entire stake in the trust. He has been under pressure to offload liquid assets to make up for underperformance in his flagship fund.

8% Yield Loans - Latest

  • The latest tranche of the Seascape offering has just been released to market. The offer is for £250,000, with a fixed-rate yield of 8 per cent. The term of the loan of five years. It's 28 per cent subscribed at the time of writing.
  • The £150,000 property-backed loan, North-East Property Investment, has a fixed-rate yield of eight per cent over three years. It's 84 per cent subscribed at the time of writing.
As ever, we've made our best efforts in due diligence and credit analysis before awarding this loan an A rating. However, we cannot warrant that the representations of the borrower are true – though clearly we believe them to be so.
  • Please remember there is always an element of risk, and capital loaned is at risk. See risk warnings at the foot of this article, on our Home page and in FAQs on site.

A Process Guide To Innovative Finance ISA Investment

Money&Co. lenders have achieved an average return of more than 8 per cent gross (before we deduct our one per cent fee). That figure is the result of almost £15 million of loans facilitated on the site, as we bring individuals looking for a good return on capital together with carefully vetted small companies seeking funds for growth. Bear in mind that lenders' capital is at risk. Read warnings on site before committing capital.All loans on site are eligible to be held in a Money&Co. Innovative Finance Individual Savings Account (IFISA), up to the annual ISA limit of £20,000. Such loans offer lenders tax-free income. Our offering is an Innovative Finance ISA (IFISA) that can hold the peer-to-peer (P2P) business loans that Money&Co. facilitates. For the purposes of this article, the terms ISA and IFISA are interchangeable.So here's our guide to the process:
  • Step 1: Register as a lender. Go to the login page, and go through the process that the law requires us to effect. This means we have to do basic checks on you to comply with money-laundering and other security requirements.
  • Step 2: Put money into your account. This is best done by electronic transfer. We can also process paper cheques drawn in favour of Denmark Square Limited, the parent company of Money&Co.
  • Step 3: Buy loans in the loan market. Once you've put cash in your account it will sit there - and it won't earn interest until you've bought a piece of a loan. It's this final step that requires lenders and IFISA investors to be pro-active. Just choose some loans - all loans on the Money&Co. site can be held in an IFISA - and your money will start earning tax-free interest.
The ISA allowance for 2019/20 is unchanged from last tax year at £20,000, allowing a married couple to put £40,000 into a tax-free environment. Over three years, an investment of this scale in two Money&Co. Innovative Finance ISAs would generate £8,400 of income completely free of tax. We're assuming a 7 per cent return, net of charges and free of tax here.Once you have made your initial commitment, you might then consider diversifying - buying a spread of loans. To do this, you can go into the "loans for sale" market. All loans bought in this market also qualify for IFISA tax benefits.

Risk: Security, Access, Yield

Do consider not just the return, but the security and the ease of access to your investment. We write regularly about these three key factors. Here's one of several earlier articles on security, access and yield.

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Disclaimer: Money&Co.™ is the trading name of Denmark Square Limited, Company Number 08561817, registered in England & Wales, authorised and regulated by the Financial Conduct Authority (FCA). The company is identified on the Financial Services Register under Reference Number 727325. The registered office is 58 Glentham Road, Barnes, London, SW13 9JJ where the register of Directors may be inspected. Denmark Square Limited (ISA manager reference number Z1932) manages the Money&Co. Innovative Finance ISA.