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While my portfolio continues to provide excellent returns, I’m growing impatient with the Baltic platforms’ reluctance to improve their transparency and stability.
With the collapse of Lendy still on my mind, I’ve been working on an article series that deals with mitigating the risks of online loan financing. Finally I decided it’s all too theoretic: To promote actual change, I’ll need to take the gloves off. Once I find some free time, I’m hoping to write something a bit different. Stay tuned, and let’s get back to the June report.
Table of Contents
- P2P Conference
- Fast Invest
- Surprise New Platform!
- My Distribution and Profit
A conference dealing with P2P and P2B investments was held this month in Riga, Lavia. I was not able to attend, but it was good to hear that Baltic loan platforms are receiving public recognition, discussing possible cooperations, and accepting constructive critique from investors.
On the other hand, I couldn’t help but feel that the recognition mostly came from within this small industry itself. Only Baltic platforms participated, and the speakers were either platform representatives, who lack objectivity, or bloggers/investors, who are also a bit swayed in favour of the platforms. In future conferences I hope to see non-affiliated financial experts, who can provide more objective analysis, ask difficult questions, and share their insights about risk, regulation, and the future of this industry.
A lot happened on Mintos this month. First, they held a short but wide-spread cashback campaign, encompassing 10 different loan originators. Second, they introduced 3 new loan originators, upgraded the ratings of 8 other originators, and kicked out a few problematic ones (I consider this a positive sign: Mintos is keeping tabs on its originators).
Third, they announced “Invest & Access”: a simplified auto-invest mechanism which allows quick liquidation by shifting loans to other investors. “I&A” is aimed at users seeking a hassle-free, commitment-free investment. More dedicated investors are better off managing their portfolios manually to avoid bad loans and loan originators. (Since “I&A” doesn’t give investors control of their distribution, I would expect Mintos to offer its own guarantee to these investors in case a loan originator defaults.)
In spite of all the action, the volume of funded loans has not increased much beyond the regular growth trajectory; the available loan volume is breaking new records, and interest rates continue to soar. This indicates to me that Mintos has reached high market saturation in its main target countries, and needs to draw attention from new markets to make the next leap in investor count.
On that note… For the past few months, Mintos hasn’t been accepting UK investors. Starting June, they don’t allow existing UK investors to reinvest their funds either. After providing some dodgy answers, Mintos finally admitted that the issue lies with their failure to adhere to FCA regulation. I don’t like the way in which they handle this charade.
My portfolio continues to operate flawlessly, and I was happy to see 2 new originators added this month. On the other hand, I’m disappointed with the newly-introduced Loan Originators section. It provides information about the originators’ activity on Grupeer, and some promotional blog interviews, but almost no information about their financial performance.
Other promised and long-awaited features, like a status indicator for loans and more detailed account statistics, have not yet been added. And Grupeer‘s annual reports are not yet public.
I have recently watched and read several interviews with Grupeer, which only increased my liking for this platform. They seem genuine, serious and well-intentioned. But words are meaningless without action: They have to get a grip and push their transparency and statistical info 10 steps forward, soon.
UPDATE 4/7/19: Grupeer just released a roadmap for their upcoming improvements, including transparency and statistics. I wish these changes were implemented sooner, but it’s great to have a specific date for them.
A few conservative loans were listed this month, which is what I’m looking for on real estate platforms. I’ve made 2 new investments; here is one of them:
Most of my loans are being repaid as planned. One was extended in accordance with the contract. I continue to follow the late loan which I sold away last month; the payment was eventually made, but the next one was pushed ahead due to the same delay with the supplier. Not too worrying.
My “full bullet” loans (which will only be repaid when they reach maturity) make it difficult to estimate the ongoing portfolio performance, but my expected return is 13.77%, and so far I’m happy.
Lastly, Crowdestate updated the personal portfolio view to provide more details about past and upcoming payments. A bit confusing to use, but the concept is excellent.
Payments are arriving as expected, but no projects were published this month. Envestio has been talking for some time now about an upcoming cooperation agreement which would result in a wave of new projects. I really hope they come through. Remember: The upcoming projects will be funded very quickly. To grab a share, you will need to have money waiting in your Envestio account.
Late loans are still common, but are eventually repaid without defaulting, so I’m not too worried. Still, I wish Lenndy found a way to shorten the grace period and reduce the ratio of late payments. My XIRR since joining the platform in February is 10.1%, compared to the expected 12%.
The 2018 financial statements of their 3 loan originators were just published:
First finance (pdf)
Assets: €7.3m – up from €4.5m in 2017
Revenue: €3.3m – up from €2.7m
Profit: €26k – DOWN from €50k
Profitable, but barely. Possibly due to starting operations in Lithuania?
Assets: €413k – up from €277k in 2017
Revenue: €88k – up from €44k
Profit: €10.8k – up from a loss of 4k
Tiny company. Impressive growth and decent profit margin.
Daily Credit (pdf)
2017 data isn’t provided.
Not a large operation, but the profit margin is beautiful.
Lenndy‘s “quality over quantity” approach seems out of place when their competitors are constantly progressing. Their originators are small, the platform still misses some key functionality, and their own financials are not yet published. What I want most is for them to merge with another platform, like Grupeer or Mintos.
Fast Invest (mini-review)
In December of last year, Fast Invest told blogger Jørgen Wolf that they were working hard on improving transparency, and hinted that the names of their loan originators would be published by Q2 2019. Well, not much has changed since. Little transparency, dodgy answers, inspirational quotes on Facebook, and no loan originators revealed. When I last asked, they said it would happen “soon”.
The platform still delivers good and stable returns, but I promised myself I would pull out if they didn’t improve transparency. Sadly, they built the platform and their earlier cashback offers in a way that screws investors for withdrawing early. So I’m stuck with FI until August – and that’s how long they have to keep their promises.
In last month’s report I was contemplating joining EstateGuru, but have decided against, for three reasons:
- Their ratio of default loans has increased from 2.2% (May) to 3.5% (June).
- I’m already invested in Baltic real estate, and wanted to diversify into other markets.
- They have not reached profitability as of 2017, and their 2018 annual report has not yet been published.
Update 8.7.19: EstateGuru has published its 2018 annual report, and it’s good. I’m happy to see they have finally reached profitability after several years in business. 🎉
Negative notes: The profit margin isn’t very high considering the growing expense of ongoing operations. That means they have to maintain the current level of revenue to remain profitable. If the Baltic real estate market slows down and they don’t adjust their expenses immediately, their larger operating costs would drive them into loss. Hopefully the €304k consultancy fee (!) won’t become a regular expense.
Positive notes: Total assets, debt-to-equity ratio and other financial indicators have improved significantly since last year, at least by my humble understanding.
Anyway, I’ve been on the lookout for another real estate platform. Which brings us to…
Surprise New Platform: EVOEstate
A few months ago I came across some blog posts by Gustas Germanavičius, an experienced real estate investor, and was extremely impressed with his in-depth analysis of investment opportunities. Since then, Gustas and his partner have publicly launched EVOEstate, a unique platform that serves as a mediator between investors and real estate platforms.
EVOEstate offers three advantages over regular platforms. First, it enables investors from all around the world to invest in country-restricted platforms, allowing diversification across markets. Second, it consolidates investors’ portfolios, saving them the trouble of using separate platforms. Lastly and most importantly, they run a second due diligence process, and present investors with carefully hand-picked projects, the best of the best.
I have long been advocating for consolidation within the Baltic P2P/P2B industry. A mediator like EVOEstate could be the way to get there, but first they need to grow about a hundred times larger. Until then, the thing that convinced me to join EVO was this post.
This is exactly what I’m missing on other platforms: An honest, no-bullshit, introspective approach. Rather than covering up their shortcomings, EVOEstate shines a light on them and offers a concrete plan for improvement. Kudos. I deposited a small amount in June, because that’s what I had available, but will increase my stake in July.
My Distribution and Profit
This time I saved the bottom line for, well, the bottom:
Mintos LO Distribution:
That’s it for June. Stay tuned 🙂