Tag: portfolio

ArchOver launches Investment Plan

Author
Angus Dent
Date

ArchOver launches Investment Plan

Automated spread investment will help both private and professionals make the most of P2P loans

London, UK – 08 October 2018 – ArchOver, the peer-to-peer (P2P) business lending platform, is expanding its offering with the launch of an automated portfolio investment option on loans for SMEs.

The ArchOver Investment Plan has an annual target rate of up to 6.4%. It will accept pledges from £250, improving accessibility for retail investors.

“Peer-to-peer was established to democratise finance”, commented Angus Dent, CEO. “We knew there was demand from potential investors who could benefit from our model, but didn’t necessarily want to lend borrower-project-by-borrower-project, including investment houses that require a more diversified portfolio with cross-sector exposure. Institutions using the service will now be able to let ArchOver administer their portfolio for the first time.”

“We also wanted to provide a portfolio lending strategy for private investors. With the entry point at £250, our platform will now be accessible to an even wider group of people.”

Each Investment Plan will be spread over a minimum of ten secured investment projects on the platform, with no more than 10% of the portfolio being exposed to any one Borrower. The loans will benefit from ArchOver’s full range of security measures, including controlled accounts, credit insurance (where applicable), dispute resolution and an all-assets charge with Companies House.

As a result of the spread investment, investors’ exposure to risk is low, but they still benefit from ArchOver’s high rate of return and top-quality Borrowers, making the service a strong choice for individuals and institutions alike.

The new service comes amid a period of sustained growth for ArchOver, which recently launched its IFISA and achieved over £80 million in total funding facilitated, as well as expanding its leadership team to support further business growth.

– ENDS –

Telegraph Hub: Is your pension enough? Three ways to make the most out of your money

Author
Angus Dent
Date

ArchOver has teamed up with The Telegraph to produce a series of articles to help educate investors on the UK Peer-to-Peer Lending sector. In a brave new economic and financial world, understanding different ways of managing your money is key to success. P2P Lending can help both individuals and businesses navigate a post-Brexit world, with the reassurance that it is a secured and effective method of protecting and growing your money.

Getting a good return on your investments is more crucial than ever as you approach retirement.

With the base rate at record lows and living costs high, putting together a nest egg is difficult while you are working. What’s more, when working people begin to approach retirement, they are often encouraged to switch their investments into lower-risk assets, a process known as “lifestyling”.

This can further decrease the chance of a good pension pot because these lower-risk assets, such as government gilts, often provide very low returns.

Making it last

Once pensioners reach what is called the “decumulation phase” – when they retire and start to use their savings to live on – the problem continues.

Unless they buy an annuity, which gives a guaranteed lifetime income, pensioners must use their nest egg to meet their living costs for the rest of their lives. And annuities are by no means fail safe – rates have halved in the past 10 years and unless pensioners continue to invest and gain returns, their pension pot is likely to fall in value due to inflation.

With this in mind, investors must consider all the options to ensure their pension saving is adequate and that they make the most of their savings approaching retirement without taking undue risk.

1. The traditional route

A portfolio of shares and bonds or funds is a traditional option.

Returns on a share and bond portfolio will vary, and the value of your money can go up as well as down. Choosing shares that pay dividends can help to swell your nest egg over time. The latest Barclays Equity Gilt study shows that the average share investment would have returned 2.3pc per year after inflation in the past 10 years, with bonds returning 3pc.

pension-grow-basket

2. Buy-to-let

Buy-to-let property has been a popular option for pensioners wanting to make the most of their nest eggs. However, a raft of tax changes including higher stamp duty on second properties and a phasing out of buy-to-let tax relief makes this less attractive.

There are also costs associated with buy-to-let including budgeting for void periods. Rental yields can be high, with recent figures from Lendinvest showing that buy-to-let hotspots including Gloucester and Blackburn have yields at over 4pc.

3. Peer-to-peer lending

Peer-to-peer lending is another option, which may produce a higher return, but also puts your capital at risk. Peer-to-peer sites lend money to individuals or businesses and can offer rates of up to 7pc.

Different peer-to-peer sites offer different forms of security for your cash and different lending models, so it’s important to understand how the system works.

ArchOver, which specialises in business peer-to-peer lending, offers rates of between six and seven per cent, and lenders can tie up their money for as little as three months – although 12 months is more likely.

Angus Dent, chief executive at ArchOver, says he believes the product is suitable for pensioners who have done their homework and who could use peer-to-peer lending as part of a diversified portfolio. “Our oldest lender is in his 90s,” he says.

 

How ArchOver Works.

ArchOver matches lenders and borrowers so that lenders earn a competitive rate on their money and borrowers can get the money they need for their business to grow. As well as doing their own due diligence on the companies on their platform, loans made through ArchOver are “secured and insured”.

The security policy involves ArchOver, on behalf of its lenders, having the first right to the Accounts Receivable of each borrower, which they are required to keep at a level of 125 per cent of the loan. ArchOver’s charge over the Accounts Receivable is registered at Companies House. A secondary policy requires the borrower insuring the Accounts Receivables – the money owed by their customers for goods and services that have already been delivered – against the loan.

If a customer of the borrower pays unduly late, or doesn’t pay at all, the insurance company pays out to the lender.

 

New Ideas, Polar Bears and Praise for the FCA’s Approach to P2P Lending

Author
Angus Dent
Date

Thought provoking piece in CAPX by Jamie Whyte challenging the new “intellectual protectionists” who, unless we are careful will stifle change and growth, make everything cuddly and bankrupt us in the process. If we accept only the perceived wisdom of today and make it an offence to suggest anything else, yes some supposedly clever people really have suggested that we’ll stagnate.

 

Contrast the approach of making denial of climate change a criminal offence, with the active approach taken by the FCA to P2P lending as reported in Business Insider. The ingenuity of a lot of people is being encouraged and a sector carved out of the banking industry, which is and will continue, there’s an awfully long way to go yet, to provide better service to consumers. Of course the real contrast for the FinTech sector is not with the polar bear, but between the US and the UK. The UK has the white heat of the revolution, echoes of Coalbrookdale from an earlier industrial revolution, and with continued acceptance of new ideas by regulators and financiers will keep it.

polar bear

 

I’m not suggesting that everything is perfect, rightly there is concern that lenders (or investors in FCA speak) fully understand the risks they are taking. A recent survey suggests that the message is being heard. As a sector we need to continue to reinforce the message heard by those in the dark blue sectors and work, with the FCA, on the lighter blue. What we need is continued consultation, a continuation of the active approach to regulation and a fuller analysis of the security provided by P2P lenders. A move away from a concentration on the nebulous and usually unquantifiable concept of risk to security provided.

consumer perception p2p photo 

For the record I don’t deny climate change, it is real, although I suspect it and its effects have been overstated. As for Germaine Greer, see the CAPX article, I agree with little she says and she has an absolute right to say it and to be heard. Only by hearing can we be challenged to change and develop and yes this may at times be very uncomfortable and much less than cuddly. C’est la vie.

The Case for Diversification across the Crowdfunding Risk-Reward Spectrum

Author
Angus Dent
Date

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Ten years on from the creation of the world’s first peer-to-peer lending platform, the alternative finance sector’s stupendous rate of growth has rendered it unrecognisable. This has been a decade in which cumulative funding by UK platforms has risen from under £50,000 to almost £3.4 billion, driven by a proliferation in the number of platforms in existence as well as in the scope of their models and products.

The factors that have catalysed the development of alternative finance and allowed the sector to shake off its “cottage industry” credentials are manifold and too broad to discuss in this particular post. Symptomatic of its increasing importance, though, is the level of interest with which national authorities have begun to approach it; the FCA stepped in with a raft of legislation in April 2014 to begin the process of regulating the sector, whilst the government continues to postulate the benefits of including P2P lending within the ISA framework. Both of these activities serve to validate the growth that has taken place and to further legitimise alternative finance as a new investable asset class.

Indeed, it is hoped that such high-level involvement will encourage those who have been watching the space’s growth from afar, such as the IFA community, who have so far trodden a cautious line, to begin to engage more readily with the sector for the benefit of themselves and their clients. Underpinning the reticence that can still be found in some quarters, though, is the question of how alternative finance should be approached as an asset class and included within an investment portfolio. After all, the growth that has taken place has engendered much greater complexity, with the numerous products now on offer carrying different rates of risk and return.

In my opinion, the answer is to look for diversification. Diversification is a central tenet of Modern Portfolio Theory and its benefits have been frequently extolled since the 1950s. In recent years, however, the concept has come under some scrutiny. Active fund managers who heavily diversify their funds are often lambasted as “closet-indexers” – those whose funds simply replicate the performance of their benchmarks, but at a greater cost to the consumer due to their hefty fees. As cheap passive investment vehicles such as ETFs become more common, it is argued that this approach is unsustainable and active managers should maintain a smaller, “conviction based” portfolio to achieve outperformance. Yet whilst the world’s foremost investor, Warren Buffet, conforms to this viewpoint, casting over-diversification by professionals as mere “protection against ignorance,” he acknowledges that the concept retains its relevance for those without his powers of prescience, namely individual investors. And with the majority of investors gaining exposure to alternative finance without professionally managed vehicles, diversification remains important.

Strategies for achieving diversification are potentially numerous, and could include spreading investments across different platforms, geographies, products and risk-grades. A well-constructed portfolio that adopts such strategies should grant good exposure to this exciting sector, whilst simultaneously mitigating the risk to the investor. For example, an investor might look to higher grade business loans, higher grade consumer loans, and loans secured against property as the low-risk bedrock of their portfolio. The next risk band might contain medium-grade business loans as well as loans facilitated by foreign platforms, which whilst achieving geographic distribution could also bring in the risk of currency fluctuation. Finally, the highest risk section of such a portfolio would likely be composed of equity crowdfunding propositions, which carry the greatest potential rewards of all but also a significant risk of failure.

Whilst lowering risk for the non-professional investor is perhaps the most obvious benefit of diversifying a portfolio in this way, it also serves to allocate investors’ capital in a way that is equitable and consistent with the aims of a sector that developed to bolster investment to individuals and undercapitalised businesses. With reference to businesses specifically, it has been estimated that there will be a funding shortfall for SMEs of £84-191 billion between 2012 and 2016 as traditional sources of finance remain stifled. Spreading investment across the spectrum of opportunities, investing in the debt and equity of diverse businesses at different phases in their growth cycles, which are united by their need for a cash injection, spreads the benefits of this new mode of funding. It is best for investor security, and best for the economy.