April 20, 2018

Funding Circle Results

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Last year I expected to significantly reduce the balance of my Funding Circle account over the following year. Well, the year has passed and a noticeable amount has been withdrawn, but there is still enough there to get an idea of the returns. So, what happened over the last year?

Here are the returns for the last UK tax year:

Gross: 8.5%
After Fees: 7.5%
After Bad Debt & Recoveries: 6.4%

A lower return than last year (7%), but still a decent return, although not as good as other investments . Gross returns and fees have stayed roughly steady compared to last year. The decrease has come from an increase in net bad debts. It would be nice to think this is due to Brexit issues or a change in the site’s system reducing choice (see below), but I doubt it. I’m fairly sure the rise in bad debts is due to a couple of the real estate loans I added last year going under in the dropping UK property market. Based on the loan-equity ratios for those loans I would expect recoveries to be very high, but that takes time, and right now the loss has to be realised.

Since the last report, Funding Circle have changed their system again. It is no longer possible to choose the individual loans, instead clients are forced to go into an automatic system based on two credit rating buckets. I have gone for the A rated loans. Will lower customer involvement result in better returns? I’m not sure in the current environment. Thus I will continue to slowly drain funds from the account.

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