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The demise of Kuetzal, Envestio and Boldyield has sparked a crisis of trust in the Baltic crowdfunding sphere. Sadly, the distrust is reinforced by unpleasant discoveries made about different platforms, which include shady dealings, conflicting interests, bad business practices and dishonest communication with investors.
Monethera and Wisefund are quite obviously in trouble. I already posted my negative opinion of TFG Crowd, as well as some surprising findings about Grupeer. I will mention some issues with other platforms along this post.
I feel that most platform need a change of attitude. Stop with the promotional bullshit; start acting like professional investment managers and present us with facts as they are. If any platform official is reading this, please take it as constructive criticism – and note the examples from other platforms as well.
If anyone wishes to join any of the platforms discussed below, here are my bonus sign-up links.
Table of Contents
- Fast Invest
- Israeli platforms and corona
- Distribution & profit
- Affiliate commissions and giving back
Interest rates are at an all-time high, up to 17% for euro loans by high-risk originators. Meanwhile, the most established originators continue to offer more conservative rates. I find this correlation between risk and return very reasonable.
Seven new originators were introduced in February, one of them in a new territory, Bosnia and Herzegovina. Two existing originators have published impressive overviews of their 2019 financials: Mogo and Sun Finance.
However… Sun Finance does not offer a group guarantee, which makes their consolidated financials misleading: You can’t know which of the subsidiaries are profitable and which are at risk.
Mintos is becoming increasingly complicated, with all those shadow parent companies. Personally, I feel that the promotional message of “diversifying into many small originators” is getting old. I would much rather see all those small subsidiaries which are “related parties” merge into one huge group, similar to Aventus on PeerBerry, but with a group guarantee.
By the way, UK originator Peachy has just announced that it’s initiating an orderly wind-down. It would be interesting to see how such a wind-down is handled by Mintos. I’ve been monitoring recoveries from other loan originators in distress: Monego and IuteCredit Kosovo are gradually repaying their debts, but Eurocent, Aforti and Rapido are not.
Sadly, Mintos announced that it would stop posting blog updates about Aforti and Rapido, and instead share them only with affected investors by mail. Peachy wasn’t publicly announced either. This is another very bad practice, clearly meant to sweep these important issues under the rug.
Grupeer celebrated its third birthday this month. They’ve also released the much-anticipated update to the portfolio view, but it’s really not what I had in mind.
I feel that Grupeer has good intentions and a lot of potential, but keeps making gigantic mistakes, and seriously needs to improve its business practices and communication. I’ll dedicate a whole post to this topic, mainly for the benefit of Grupeer itself.
On a happier note, Grupeer has posted a nice video where different borrowers discuss the business loans they had taken from British originator CubeFunder. It’s great to see the actual people, places of business and equipment purchased using the loans:
The number of loans listed per month remains steady. Some projects are funded rather quickly, while others struggle for a few weeks.
Since the introduction of the tax withholding system in January, Crowdestate returns seem a lot less attractive to me. It’s possible to upload a tax certificate document to reduce the withheld tax, but I haven’t figured out yet how to obtain this certificate, and honestly I don’t care much how the tax is split between countries; either way it’s a hassle.
Even before the change, Crowdestate returns have been struggling to catch up with expected levels, due to the non-monthly amortisation, and my discount-selling of problematic loans. Overall I’m still content with CE, my portfolio is mostly in good standing, and problematic loans seem to have a good chance of recovery. It’s just not very tempting to increase my investment.
One of the originators has started offering loans with 15.5% interest rate, never before seen on PeerBerry. However, both my February return (10.19% annualised) and my long-term XIRR (10.6%) remain much lower than expected (>12%), possibly due to late loans. It’s rather strange, because returns usually catch up to expectations in about 3 months on platforms with buyback guarantee.
I don’t understand why PeerBerry is taking so long to fix their slow servers and other issues. On November 27th I sent a list of 10 suggestions for important interface improvements. Three months later, only 1 suggestion has been implemented. Last month’s promise to add the entire team (and preferably the owners as well) to the About page has not been fulfilled either.
But does group performance even matter when there is no group guarantee? Investors are no longer impressed by the ability to diversify into a million small companies; instead, we are looking to invest in fewer, stronger entities. I wouldn’t even mind earning ~0.5% less if I knew that every Aventus subsidiary shares the same group guarantee. Same for GoFinGo. It would save me the hassle of constantly checking who has signed “guarantee agreements” with whom.
Until that day comes, and as long as small subsidiaries are responsible for buyback guarantees, we need to see their individual financials.
This is a good opportunity to remind my readers (especially those working for crowdfunding platforms) that I joined EvoEstate after reading an article by the CEO, where he openly discussed some of the mistakes they made titled and how they were going to fix them. Thanks to this honest approach, EvoEstate remains one of my most trusted platforms.
In February, the About page was updated to include the CTO and a new team member in charge of Spain and LatAm operations, as well as 5 of the external advisers (there are others as well).
On a less positive notes, three things bother me about EvoEstate. First, even great projects like these take weeks to be funded:
I see it as indication of the small number of investors and lacklustre investor enthusiasm both on the originating platforms and on EvoEstate.
Second, projects are too commonly cancelled or repaid early. I’ve also seen a few too many mistakes and bugs in project descriptions, dates, interest rates or payments.
(Update: The person responsible for the project description mistake was already fired.)
Surprises and small mistakes are to be expected when listing complex deals originated by other platforms. It’s important to note that no harm was caused to investors: principal and interest are always repaid in full. Still, these occurrences give EvoEstate an “experimental” vibe which I honestly don’t like. I would prefer to see projects listed accurately and run according to their original schedule.
Third and last: The interface still lags behind competitors platforms. Crowdestate is particularly impressive in this regard:
Lenndy lags behind every competitor in terms of growth and innovation. It has a horrible ratio of late loans which significantly delays returns. And I recently discovered that much of the team has changed, without anyone bothering to update the About page (see my January update to Lenndy’s TORCH report).
But whenever I consider leaving this peculiar platform, something changes my mind. This month it was the successful recovery of a failing real-estate loan, and the publication of a 2019 overview which includes very positive Q3 financial statements from all three originators. If only Lenndy grew its potential into something more…
Crowdestor is a new addition to my portfolio, meant to fill the role of a “high risk, high reward” performer, fill the gap created by the collapse of Envestio, and hopefully help me regain the losses.
Naturally, I enter this platform with heavy fears. It operates in a very similar model to shady platforms, but close scrutiny has failed to reveal any dirt on Crowdestor and its team. Project details and transparency are better than what I’m used to from Envestio, but not really on par with more solid real estate platforms.
Still, I kept hearing good things about Crowdestor, and was impressed by Janis Timma’s background and his dedication to answering investors’ questions on Facebook.
Then, after ridiculing TFG Crowd for using stock photos for real estate projects, I noticed the same horrible practice on Crowdestor. Imagine my disappointment! I actually created a survey to check what other investors thought of this practice:
OK, this isn’t very scientific, and someone added a profane option. Still, the message couldn’t be clearer: 100% of investors don’t appreciate being mislead by stock photos. 72.7% say they will invest less in a platform which promotes itself like this.
So why, oh why, are such misleading practices so common on P2B platforms?
This month I was attacked on Facebook for criticising some other platforms while letting Fast Invest off the hook. I tried to explain that I’m definitely not letting Fast Invest off the hook, there is simply nothing new to say about them. I have been criticising the exact same things about FI for the past year and a half, and little has changed since.
It’s a shame, really, because if this platform is legit, it has the potential of being one of the most convenient and pro-investor passive-income-generators out there. But problematic business practices, low transparency and promotional bullshit stand in the way of FI gaining investors’ trust. I’m reducing my stake further.
Israeli platforms and corona
Coronavirus is raging, and while I’m sad for all the sick and quarantined people, I’m honestly a bit relieved by the effect on the stock market. You see, a drop was bound to happen, and a virus is a better reason (from an economical standpoint) than something like the bursting of the personal debt bubble, or a plunge in real estate prices.
I maintain my hedge fund investment, in hopes that it doesn’t lose as much value as the indices. I’ve liquidated my hand-picked stocks investments and shifted some of the money into one of the Israeli P2P platforms, Tarya, which seems unlikely to take a significant hit during this kind of economic recession. The other Israeli platform in my portfolio, BTB, is finally starting to gain traction, but hasn’t yet reached the expected annualised return of ~5.5% (net of tax).
Distribution & profit
Affiliate commissions and giving back
This was a very good month for affiliate commissions: €95 from Grupeer, €44 from Mintos, €15 from EvoEstate, €10 from Lenndy and €5 from PeerBerry. Thanks to all my supporters!
This month I encountered a fun way to give back: by purchasing an in-game item on Steam. The donation is meant to help Australia recover from the devastating bush fires. And look at the cute item I got!
This post is not meant as investment counselling. I am just a fellow investor sharing his thoughts and experiences.