Ups And Downs Of Mainstream's AltFi Plays - Plus Loan Latest


Regular readers will be aware that we report regularly on the ups and downs (mainly downs so far) of the mainstream's attempt to participate in alternative finance. Today we see and up- - and a down – as reported by our friends at AltFi.

Upper

Draper Esprit, the Dublin-listed venture capital firm which has been an investor in Revolut and Transferwise, has reported a year-on-year jump in pre-tax profits from £39m to £59m in the six months to September 30, according to AltFi."Draper Esprit Chief Investment Officer Simon Cook cited positive trading performances from a number of its investments including tech start-up Graphcore, consumer review website Trustpilot and cloud-based call centre business Aircall, as helping its six-month performance.The company also cited funding rounds for data analytics company Ravenpack and Pollen, an influencer marketing company, as underpinning its performance.Simon Cook, Chief Investment Officer at Draper Esprit, said: "We have recorded a strong first six-month performance and our 12 percent fair value increase during the period means that we are on track to deliver our stated 20% annualised portfolio return target."

Downer

Meanwhile, the news is darker elsewhere in the sector.Augmentum Fintech has delayed the publication of its interim results, citing uncertainty of the value of its holding in peer-to-peer lender Zopa.The financial results were due to be published today (November 26) but have been pushed back to early December, the venture capital investment trust said in a statement.Zopa is reported to be looking to raise £100m to launch its bank. Zopa was granted a banking licence in December last year, with restrictions.It needs to raise the funds before December 3 as it looks to meet regulatory requirements."

Loans Latest

Mar-Key 6, rated A+, is 31 per cent filled at the time of writing. The yield on offer is 7 percent. Platform lending of the kind we facilitate here at Money&Co. can be a lucrative activity. The average yield achieved by our registered lenders over more than five years of loan facilitation on this platform is more than 8 per cent, before we deduct our one per cent charge. That return has handsomely outperformed retail price inflation, which has averaged around two per cent over this time.
  • Of course, there's no profit without risk. We vet potential borrowers extremely carefully, but there is a bad debt rate, albeit a small one, of an annualised 0.04 per cent across five years and some £19 million of loans. We make a point of highlighting the risk that comes with P2P – see the foot of this article for a full examination of risk, access and yield provisions, the risk warnings on the Home Page, in FAQs and elsewhere on site.

Historical Performance And IFISA Process Guide

  • 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 over £19 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.
  • Money&Co. has been lending for over 5 years and has only had one bad debt so far, representing a bad debt rate of 0.03 per cent per annum.
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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