Assetz Capital Review
** Assetz Capital Review updated October 1st, 2020 **
I have been investing my own money through Assetz Capital’s peer to peer loans since June 2015 and am happy with the results although I have seen loan defaults rise over the past few months. I expect defaults to rise further due to businesses being affected by the Covid-19 pandemic. Assetz Capital offers four different investment products that offer attractive returns to investors who lend against secured business and property loans.
Please be aware that due to Coronavirus, withdrawals from Access Accounts have slowed dramatically and exit is not guaranteed despite there being several exiting options.
Click here to listen / watch my podcast with Assetz Capital Founder & CEO Stuart Law.
Assetz Capital statistics: Click here
My Current Investment Amount: Click here
My current annual rate of return: 7.94% (Net return before tax)
|Est. Annual Returns:||3.75% - 15.5%
|My Risk Rating *:|
|Loan Security:||Property, debentures, personal guarantees|
|Provision Fund:||On all accounts accept the MLIA|
|Time to Become Invested:||Varies based on loan availability|
|Time Needed Managing:||None (auto account) to Medium (self-invest)|
|Sign Up:||Sign up
* This opinion risk rating factors in types of loans offered, interest rates, platform history, default numbers and my own investing experience. My risk rating explained.
Any Offers? How Do I Open An Account?
Click here to open an Assetz Capital account. No Current offers. (Please read terms and conditions on the sign-up page. When you use my link, Assetz Capital pays me a small referral fee which enables me to continue to operate this website and provide new in-depth company reviews. Thanks in advance).
The Assetz Capital Review – What You Need to Know:
- Most loans secured by property and amortise
- Competitive lender return rates
- New secondary market for possible QAA Access account exit
- Strong underwriting and default recovery team
- Profitable company with £1bn lent
- QAA Sweep function so idle funds are invested and earn interest
- Constant transparent loan information including monitoring and stress testing
- Easy to see which loans your auto-invested funds are invested into
- Very strong website security
- Non discounted exit liquidity is much slower due to Coronavirus
- No exit discounting on 30 & 90 Day Access accounts
- Discount needed to sell QAA loans can be high
- No way to view the Access secondary market queue
- 0.9% annual management fee (temporary for Covid-19 conditions)
- SME (small and medium businesses) lending can be risky
- Website can be confusing for beginners
- Low provision fund coverage on Access accounts
- Must manually invest to achieve best returns. Can be time-consuming
- Hard to assess risk on manual lending loans
Assetz Capital offers competitive good lender returns through a good mix of secured small and medium business loans. I prefer Assetz Capital’s secured loans over Funding Circle’s mostly unsecured loans. It does take some time to learn how the website works, but once you learn the system, it’s relatively straight forward.
There are four different account options ranging from the Quick Access Account (aka QAA), which offers immediate money access during normal market conditions, to the Manual Lending Investment Account (MLIA). Thinking about investing some cash through Assetz Capital? Read on for my unbiased Assetz Capital review.
During the Coronavirus crisis, Assetz Capital’s liquidity has dramatically reduced causing slow exit from all Access accounts. A queue system is now in place which you can read more about here. Frequent email updates are being sent out.
Assetz Capital released its Access accounts secondary market in August 2020, allowing investors to offer loans at a discount for faster exiting. Investor demand and supply dictate the exit market but you may need to discount your loans up to 10% to exit.
I spoke with Assetz Capital’s CEO Stuart Law on May 5th 2020. Stuart explained how Assetz Capital is dealing with Covid-19 in order to minimise defaults. I was happy with Stuart’s plan and I plan on leaving my investment as is.
* Exiting peer to peer lending investments is never guaranteed as liquidity changes during the varying market and economic conditions.
Assetz Capital Review: My experiences so far….
I started investing in Assetz Capital in June 2015 and I didn’t really understand how their website or products worked. For me, calling a company to ask for guidance is worse than asking for directions at a petrol station (pre-Google Map days). After a week of being annoyed and confused, I finally broke down and spoke to a friendly Assetz Capital staff member and after an explanation, the system became clear and I placed my first few investments through the Manual Lending Investment Account.
Prior to the addition of the Quick Access Account (QAA), there was a lack of new loans and my excess account funds sat idly by earning no interest. I constantly fought the urge to invest more than my comfort level in current loans but common sense and patience ultimately prevailed and while it has taken some time, I’m now invested in a diversified range of loans. Idle balances are automatically swept into the Quick Access Account which targets a 4.1% return annually but is likely lower due to Covid-19.
In November 2019 Assetz Capital announced the closure of the Great British Business (GBBA) and the Property Secured accounts (PSA). I will discuss my thoughts on the removal of these accounts later in this review.
I find it very difficult to assess risk when manually selecting businesses loans so I now use the QAA & 30-Day Access Accounts. I believe most inexperienced lenders’ will be far better off using an auto-invest product for diversification as risk assessment of loans is difficult and time-consuming.
I have noticed quite a few defaulted loans in my portfolio although since some of the older loan balances have been reduced, the defaults aren’t as detrimental.
The Coronavirus issue means investors’ will see slow exits from the Access accounts due to a lack of loan buyer demand causing reduced liquidity.
What Is Assetz Capital?
Assetz Capital is a UK based peer to peer lending platform that offers lenders’ investments in British business and property loans. Businesses can include manufacturing, industrial, wind turbines, law offices, hotels, restaurants, pubs, and property developers. Investors can choose between a manual lending account or three different auto investment accounts that hold baskets of loans for a hands-off investment experience. Every loan is secured by a mix of property, equipment, debentures and personal guarantees.
How Can I Contact Assetz Capital?
UK Tel: 0800 470 0430
When Did Assetz Capital Launch?
Are They Regulated?
Yes, by the UK Government’s Financial Conduct Authority #724996 under full permissions granted September 1st, 2017. Investments made through Assetz Capital are not covered under the FSCS (Financial Services Compensation Scheme). FCA regulation is nothing like the FSCS, which covers consumers when they deposit money in banks. The FCA reports to the UK government and has the ability to pursue criminal action against companies which violate its standards and codes of conduct.
Who Can Open An Account?
Any UK resident or non-resident with a UK bank account can open an Assetz Capital account. Residents of other countries who pass the security checks can also open an account as long as they have a UK bank account. Yes even U.S. citizens!
What’s The Signup Process Like?
Easy. You will have to pass the usual security checks by providing either a bank statement not older than three months, a copy of drivers license or a utility bill.
How Much Time Will It Take To Become Invested?
Under normal market conditions, you can quickly become invested in the Quick Access Account. The other accounts depend solely on demand and supply levels and which loans you want to purchase. It took me about two months to become fully diversified in the Manual Investment Account but demand and supply changes daily.
Due to the Covid-19 pandemic, Assetz Capital has many loans available to investing is fast.
Again investment time varies based on demand and supply.
What’s The Minimum Deposit / Investment?
See account descriptions below
How Are Deposits Made?
Via bank transfer which has become much faster than when I first deposited. It took my deposit three days to be credited but now if you make a bank transfer using Faster Payments between standard business hours, you can receive your credit in as quickly as one hour.
Can I Exit My Investments?
All of Assetz Capital’s products offer exit options however in order to sell your investments, buyer demand must exist. Therefore, exiting is never guaranteed and is based on market conditions and buyer and seller demand.
Due to the economic conditions of the Covid-19 virus, loan sales have dramatically slowed and a queuing system is in place.
However, the new QAA account secondary market has helped with exit liquidity although you might need to heavily discount your loans to exit.
How Does The Access Account Secondary Market Work?
Assetz Capital announced the release of its new Access accounts secondary market on August 12th, 2020. This secondary market allows sellers to set a discount rate for loans within their QAA account for faster possible exit and in turn, allows buys to purchase loans at a discount. There’s no way to discount exit from 30 & 90 Day Access accounts.
Is There a Fee?
How Much Of A Discount Can Be Set?
Up to 99.9%. Yes, you can almost give your loans away for free (don’t do that!).
Which Access Accounts Can Sell At A Discount?
Some of the information on Assetz Capital’s website was confusing but you can only sell discounted loans through the Quick Access Account (QAA).
What Happens If I Want To Sell Out of My 30 & 90 Day Access Account Loans?
You can still attempt to exit from these accounts but these loans sell at par (0% discount) and have been experiencing very slow-selling times due to the Covid-19 pandemic situation.
If you want to exit the 30 or 90 Days Access accounts, you give your exit notice by clicking withdrawal. There’s no way to discount these accounts so hang on and hope your loans are sold at par (0% discount):
Once you click on the withdraw button, depending on which account you select for your money to be paid into, you’ll be giving some confusing information. If you select Cash account you’ll see this information:
I was confused so I hopped on the live chat with Assetz Capital to clarify that you cannot discount any loans in the 30 & 90 Day accounts which is correct.
If you set money to be withdrawn from your 30 or 90 Day account to your QAA account you will see this information:
If and when money is sent to your QAA account, from there you can discount your loans for a faster exit. If you set your 30 & 90 Day account money to be sent to your cash holding account, obviously you will have your cash so there’s no need to discount your loans in the QAA account.
The only reason to set your 30 and 90 Day Access account funds to be paid into the QAA is if you don’t want to withdraw your money and want it to gain interest until you are ready to sell t a later date.
How Do I Discount Loans Inside The QAA Access Account?
Discounted selling can only be completed within the Quick Access Account (QAA) where you can try to sell at par (no discount), at a discount amount you set or at the current market rate discount.
In your dashboard, click the Withdraw button under your QAA account:
Once you fill out the fields, you’ll be given the latest discount information:
In the example above, I have £50 of loans I want to sell immediately, I can discount by 7.9% and receive £46.05 (£50 – £3.95 discount). This means there is a seller who is willing to buy my loans at a 7.9% discount and who will receive £50 of loans for only £46.05.
Alternatively, you can set your preferred discounted rate and wait for someone who is willing to buy your loans for that discounted amount:
The issue with setting a discount rate lower than the market is there’s no way to see what’s on the market or know how many people are offering a lower rate than you, possibly making your exit attempt futile.
How Can I Buy Discounted Access Account Loans?
Easily. You have two purchasing options.
- You can purchase what’s available on the market. Just click the Invest button on your QAA account and see what’s being offered:
You can see in the above example that I can buy loans at a 6.5% discount meaning I would receive £100 of loans for a cost of only £93.50.
2. The second purchase option is to set your own discount requirement rate. The issue with this option is there’s no way to know what other discounts investors are willing to buy so your order may not be executed:
Does Assetz Capital Offer An Innovative Finance ISA?
How Much Interest Does Assetz Capital Pay Lenders?
Annual gross return rates range from 3.75% to 15%, depending on the risk level and loan type. Interest rates have recently fallen recently and the new norm for new loans will be in the 4.5% to 9% range. The secondary market still offers loans that pay 10% but they are becoming scarce as interest rates fall and lender demand increases.
Is Interest Accrued Immediately Or When the Loan Starts?
On new loans, interest accrues once the money is issued (drawn down) to the borrower. On secondary market loans, interest accrues once you purchase a loan part and it is allocated to you. On the auto-invest accounts, interest accrues once your money is invested.
When Is Interest Paid?
Various times of the month depending on which investment product you select.
Am I Lending To The Assetz Capital Platform Or To The Borrower?
All loan contracts are directly between investors and borrowers.
What Are The Fees?
Assetz Capital has announced a 0.9% annual management fee beginning May 1st, 2020. This fee was deemed needed by Assetz Capital due to the Coronavirus effects on their business and the fee will likely be eliminated in the future.
How Much Time Is Needed Managing My Accounts and Investments?
This depends on which accounts you choose to invest through:
Quick Access Account (QAA): No time needed once invested
30 Day Access: No time needed once invested
90 Day Access: No time needed once invested
DISCONTINUED Property Secured Investment Account (PSIA): No time needed
DISCONTINUED Great British Business Account (GBBA): No time needed
Manual Loan Investment Account (MLIA): Low to medium amount of time needed analysing new loan offerings and buying and selling loans on the secondary market.
How Long Are The Loans?
Assetz Capital loans are 6-60 months but loans sometimes redeem earlier while others are extended.
What Security Does Assetz Capital Loan Against?
All property loans are secured by property at reasonable loan-to-value percentages. Business loans are usually secured by a combination of commercial or residential property, debentures and personal guarantees. I don’t think personal guarantees or debentures hold much security weight so I stick to loans that are secured by property or other disposable assets.
What Are The Loan Default Rates?
Assetz expects an average of 6.5% of its loans to default in 2020. When taking default statistics into account with Assetz Capital, most loans pay both capital and interest monthly so the older the loan, the less impactful a default is.
Default and loss rates frequently change so please check Assetz’s statistics page here.
What Happens If Assetz Capital Goes Out Of Business?
Assetz Capital is required by the FCA (Financial Conduct Authority) to have a sufficient wind-down plan in place. Assetz Capital has a trust in place in which the trustees would have the power to appoint a managing agent to wind-down the loan book. Assetz Capital doesn’t provide any detailed information about this wind-up process but I expect this to change due to the more stringent FCA regulations.
In addition to this, an administration company would work on behalf of the creditors (people owed money by Assetz Capital) and customers (borrowers) to recover as much money as possible. It’s important to know that we (lenders) are not considered creditors.
Winding down a loan book would involve large administration fees that would be taken from any recovered money so lenders would likely see a loss of capital if Assetz Capital were to close its doors. This is part of the risk of peer to peer lending.
I also recommend reading Assetz Capital’s Terms & Conditions here prior to investing.
What Are the Different Accounts and Investment Options Assetz Capital Offers?
Assetz Capital is unique in that it offers investors four accounts / investment options. Three of the four accounts have targeted interest rate returns achieved by investing in baskets of loans.
1. Quick Access Account (QAA) – £1 min, £200,000 max investment
By creating the Quick Access Account (QAA), Assetz Capital has solved two of the biggest peer to peer lending problems 1. idle funds making zero returns and 2. investors not being able to access funds. Unfortunately, liquidity has slowed due to the economic effects of the Coronavirus. When there aren’t any buyers to take over loans from sellers, liquidity slows down. Being able to exit your QAA investments isn’t guaranteed and may take a while until the economy returns to normal.
Assetz Capital now offers linvestors the option to discount their QAA loans in order to exit.
Under normal economic conditions, since loans can be paid off at any time, it is likely you’ll have idle funds sitting in your account as you wait for new loans to be offered. These idle funds can be automatically swept into the QAA which targets an attractive annual return rate of 3.75%.
The QAA is also covered by a small discretionary provision fund which aims to help cover missed loan interest or capital repayments.
Withdrawing Money: The QAA is advertised as being instant access under “normal market conditions”. Currently, because of the Coronavirus, we aren’t in normal economic conditions.
In order to understand what “normal market conditions” means and how it can affect you, it’s important to know how the QAA operates. The QAA holds a basket of loans with between one month and five-year durations. When money goes into the QAA, the account automatically buys loan pieces. When money goes out of the QAA (investor withdrawals), the fund either draws on its cash reserves or sells enough loan pieces to fund the withdrawal. So “normal market conditions” assumes that the QAA either has enough cash reserves or can sell loan pieces to fund the withdrawal.
One enticing feature of the QAA is that if you select “reinvest repayments”, all repayments will be automatically swept into the QAA:
When the QAA first opened, it was immensely popular and investment deposit amounts were capped, meaning you had to wait in a queue to become invested. Currently this isn’t the case and the cap has been removed. If the cap is reinstated, there is a nifty feature which shows you where you sit in the allocation queue:
Investor’s have used the QAA as an instant access bank account but are now seeing the risks of this. Remember that your money isn’t FSCS insured.
One thing to note, if the money in the QAA is in the investment queue, then it won’t earn any interest. If you click on the “Your Transactions” link shown on the above image, you can see if your funds are being invested into loans.
Again, due to the Coronavirus and the poor economic conditions, exiting isn’t guaranteed. This is the risk that comes along with peer to peer lending. For now “normal market conditions” do not exist so all QAA exit requests have been placed in a queuing system due.
As of June 1st, 2020, the provision fund held £400,000 which would cover 0.12% of the outstanding loan balances. You can view current statistics here.
2. 30 Day Access Account (30DAA) – £1 min, no current max investment
The 30 Day Access Account offers access to money under “normal market conditions” after giving a 30 day notice of withdrawal. You cannot withdraw money any sooner than 30 days, even if there are lenders waiting to buy. This account is covered by a small provision fund and is made up of lower risk secured business loans that “have passed Assetz Capital’s strict credit policies”. This account operates almost the same way as the QAA operates except for the 30-day withdraw notice. This account also is advertised as holding a high cash reserve. The cash reserve has changed due to the harsh economic conditions.
The gross annual target return is 5.1%. I personally don’t use this account at the moment as all my investing is done through the Manual Loan Investment Account (see below).
As of June 1st, 2020, the provision fund held £470,000 which would cover 0.17% of the outstanding loans. You can view current statistics here.
3. The 90 Day Access Account
The 90 Day Access Account operates the same way as the 30 Day Access Account except you need to give 90 days notice to withdraw money and its provision fund is very small. This account pays a higher interest return than the 30 Day account.
Remember exiting capability has drastically slowed on all the accounts due to the economic effects caused by the Coronavirus pandemic. All exit requests in the 90 Day Access account have been placed in a queue system. I’m hoping normal market conditions will return once the economy recovers.
As of June 1st, 2020, the provision fund held £110,000 which would cover only 0.02% of the outstanding loan balances. You can view current statistics here.
4. The Great British Business Account (GBBA) – CLOSED TO NEW INVESTMENT
As of November 13th, 2019, the GBBA account is closed to new investment but will continue to operate until all investor funds are repaid. Assetz Capital made this decision to simplify the platform and stated that this account had remained static in growth compared to the Access accounts.
Personally, I was surprised to hear about this closure of the GBBA. There were some investors who were unhappy with the way the account operated but personally I found it to be useful. The wind-down of the GBBA will force investors to either manually invest using the MLIA or use the lower-paying Access accounts.
Inexperienced lenders will have a hard time identifying which loans are good through the MLIA as risk assessment is extremely difficult and takes time. I’ll personally be using the Access account (likely the 30-day one) at the expense of some lower interest returns.
The GBBA account gave the investor a truly hands-off experience by investing funds into a basket of small and medium-sized business loans. The GBBA operated similarly to the QAA and was made up of loans that “have passed Assetz Capitals strict credit policies” and are secured by appropriate company assets such as property, account receivables, and machinery. The GBBA offered diversification in the way it tried to equally proportion its loan investments. For example, if there were 50 loans with availability, the GBBA would invest 2% of its money into each loan. If there were 5 loans available, then 20% of monies would go into each loan and so on.
I tested the GBBA account in September of 2017 and found it took five weeks to become fully invested. My funds were spread across 31 different loans.
Unfortunately for new lenders, the GBBA Series 2 target return rate fell from 7% to 6.25% but this was to be expected due to increased peer to peer competition. Existing lenders will continue in the Series 1 GBBA product until their loans mature, at which point, new funds will be invested into the Series 2 product. Even with the interest rate drop, I still considered the GBBA to be a viable investment product due to Assetz Capital’s strong business model.
The GBBA account will continue to be covered by a discretionary provision fund (read more about the discretionary part here). Repayments will be directed into either your cash account or the other active account choices.
The GBBA did have some downsides:
For example if there were large amounts of only a small amount of loans available, all of your available money could be invested across those loans. If those loans were to default, then your returns could be severely affected.
The GBBA wasn’t always open for immediate investment. Simply put if there wasn’t any loan availability, the GBBA placed your money into an allocation queue. This was true for new deposits and reinvestment of payments. The good news was that you could set your idle funds to be invested in the QAA while they awaited investment into the GBBA.
The hands-off GBBA account was an attractive option for those with less time to manage their investments.
As of June 1st, 2020, the provision fund held £520,000 which would cover 1.14% of the outstanding loan balances. You can view current statistics here.
5. The Property Secured Investment Account (PSIA) – CLOSED TO NEW INVESTMENT
As of November 13th, 2019, the PSIA account is closed to new investment but will continue to operate until all investor funds are repaid. Assetz Capital made this decision to simplify the platform and stated that this account had remained static in growth compared to the Access accounts. Interest and capital will continue to be paid to investors to which they can allocate these repayments where they want.
This account operated in the same way the Great British Business Account operated except the loans held within this account were property loans. Assetz has certain criteria that the property loans met to be included in the PSIA:
Just like the GBBA account, money was spread across available loans. So for example, if there are were only two available loans within this account, all your money could theoretically have been spread across those two loans hindering diversification. I didn’t use the PSIA account.
6. The Manual Loan Investment Account (MLIA) – £1 min, no current max investment
This manual account used to be my preferred investment method until I decided that assessing loan risk was too difficult and time-consuming. Returns on newer loans have dropped due to market competition as Assetz Capital’s team isn’t willing to compromise loan quality by dropping underwriting standards and offering sub-par quality loans. In other words, they don’t want to throw just any crappy loans on the platform.
If you perform due diligence and select sensible loans, I believe annual target returns should be in the 7-9% range. If you want to avoid defaults, you have to keep an eye on loan repayments to make sure the loans are current and this can be time-consuming. Loan updates are posted in the Activity section under each loan:
Here’s how the MLIA account works. Upcoming loans are listed here:
Here’s where you decide on your investment amount:
Set your target investment amount and you’re done. I’ve always received my allocated target amount but this depends on demand and supply and how much you are asking for.
Early exit from loans is the same as the GBBA Account. You click the sell button, set your sell amount and if lender buying demand exists (it currently is low), you can sell. Most of the older loans with higher interest rates are very easy to sell. The lower paying interest loans are much more difficult to sell since lenders’ are always chasing higher return loans.
WHAT I LIKE ABOUT ASSETZ CAPITAL:
Experienced Credit Team
I cannot stress how important this is. The Assetz team is constantly evaluating new loans and assessing risk to make sure quality loans are offered to lenders. What I truly appreciate about Assetz’s credit team is that they stress-test existing loans on a regular basis by looking at borrowers company accounts and making sure borrowers are adhering to the loan stipulations. This way any potential issues that might affect future loan repayments can be identified and communicated to lenders.
Please remember that no credit team will have a 100% track record of underwriting good loans. Assetz Capital will still suffer defaults but their high-quality underwriting should help keep these default rates manageable.
Since all loans are secured by assets such as property, this makes lending somewhat safer. Having said that, securities are only as good as the valuations placed upon them and disposal ability, so it’s good to read the valuation documents to see if any red flags exist. There have been a few defaults on older loans where the accuracy of valuations could have been better, but this was the exception rather than the norm. Assetz Capital’s experience has grown so valuation mistakes should be reduced.
Profitable Company That Is Growing
Assetz Capital is a profitable company which has been growing annually and now has loan book of over £1bn.
In order for a peer to peer company to survive long term, it needs to operate profitably. If a company cannot achieve profitably, this might put lender’s loans and funds in jeopardy. Assetz Capital recently reported that between April 2016 and March 2017, they earned pre-tax profits in the seven-figure range. This is great news for lenders’ as it shows stability.
Loan & Account Diversity
Assetz Capital has a loan portfolio that offers investors opportunities to spread money without being too heavy in one sector or another. You can use the variety of account options to diversify your funds appropriately.
Lenders Can Preset Funding For New And Existing Loans
Peer to peer lending can be very time-consuming so Assetz’s pre-funding feature is a huge timesaver. Whatever loans you want to buy, you simply set your requested funding amount and you are finished. You can now do this for Upcoming and Pipeline loans:
Simply click the plus sign and set your requested loan allocation lending amount. When the loan is released, you will be allocated an investment amount. This amount varies depending on loan size and how much is available.
Reasonable Default And Bad Debt Rates
Every peer to peer lending company experiences defaults. Assetz Capital’s recovery team attempts to recover capital and interest on defaulted loans. Assetz Capital has experienced a 3.75% loss rate since 2013. Here are Assetz Capital’s yearly lifetime bad debt loss rates:
And default levels:
You can view current statistics here.
Quick Access Account Sweep Function
This sweep feature is one of the best Assetz Capital offers. There’s nothing worse than idle funds earning no interest creating cash drag. Assetz’s sweep function addresses this option by allowing investors to automatically place idle funds into the interest-earning QAA account.
Here’s how you set this up from the main dashboard:
Easy To See Which Loans Are Held In Your Manual And Auto-Invest Accounts
It is now very easy to see exactly which loans are held in your auto-invest accounts. Click Loan Book Menu > Your Loans and then select the account:
If you used the auto-invest account such as the GBBA, it used to be very difficult to see which loans your money was invested in. Assetz has implemented a new feature which shows you this information when you click on an individual loan:
Alternatively, you can see your auto-invest loan holdings from the main dashboard here:
The Secondary Market
Assetz Capital has a no-fee secondary market which is useful for buying and selling loans. Remember that secondary market liquidity is low at the moment and can change on any given day depending on demand and supply so there’s no exit guarantee. Knowing this, I usually don’t buy more of a loan than I’m willing to hold to maturity.
The new Access account secondary market on the QAA is useful for those who are willing to take a discount on their loans in order to exit.
The secondary market for buying loans is very easy to use. If you see a loan in the Manual Account you want to invest in or you have money you want to invest in one of the Access accounts, simply set your investment amount and the website does the rest (see above for full instructions on how to buy discounted Access account loans. You can set targets even if there aren’t any loan pieces available and when/if they do become available, the website will automatically allocate you loan amounts.
The secondary market in the Manual account also offers buying and selling filters such as selling on a certain date, selling if a credit or monitoring alert arises, and selling for a discount:
Most Loans Amortise
This means you receive interest and principal payments monthly. Each principal payment you receive on a loan reduces the amount needed to be collected in the event of default. This means that each repayment reduces your risk exposure. The loans which are interest-only with a lump sum capital repayment at the end are clearly marked (usually the construction loans).
Strong Website Security
Assetz Capital uses an app called Authy for two-factor security on your account. This feature is used for login and withdrawals. When you want to access your account, Authy creates a one-time code and send the authorisation request to your Authy phone app which you simply click on to access the website. The same process is used when you want to withdraw money.
Since the need for stronger account security is high in a world roamed by online hackers, Assetz Capital’s implementation of this two-factor process is a great feature.
Deposits, Payments & Withdrawals
Deposits are made via bank transfer and usually show up within a few hours during normal business hours. Withdrawals usually happen within 2-3 business days.
Assetz Capital’s staff is very active in the peer to peer lending community which is very comforting. You can find them answering forum questions and they are eager to take suggestions and feedback from the very people who invest in their site. Good communications indicate a good company culture.
WHAT I DISLIKE ABOUT ASSETZ CAPITAL:
Website Can Be Confusing
When I first joined Assetz Capital, I was confused by the multitude of account choices and I found the website to be complicated. Instead of explaining why I’ll just tell you how to use the website:
Make sure everything in your Cash Account is allocated to go somewhere. If you don’t, your money will sit earning you nothing. You do this by selecting which of the accounts you want to use, and setting your preferred investment amount. Always make sure your allocated investment amounts are more than what’s sitting in your Cash Account.
Set your repayment / reinvestment options for each account you use. Options are to reinvest repayments and interest, withdraw interest or withdraw repayments and interest:
Some beginners are intimidated by Assetz Capital’s accounts, but it gets easier once you understand how the accounts work. The freeze of new investments into the GBBA and PSIA accounts will help simplify Assetz Capital.
Annual Loan Servicing Fee
On May 1st, 2020, a 0.9% annual loan servicing fee was introduced. This fee was implemented to help Asset Capital cover its costs during the economic difficulties the Coronavirus pandemic has caused.
I expect this fee to be removed once the economy returns to normal but for now, this fee will remain.
Limited Access Account Secondary Market Functionality
While I’m happy to see the introduction of this secondary market, I’m disappointed investors can only discount loans in their QAA account and not the 30 and 90 Days accounts. It seems to me that loans being sold at par in the 30 and 90 Day accounts have little chance of bing sold compared to the discounted loans in the QAA.
On the selling side, it would be nice to see a Ratesetter style queue to see just how much other investors are discounting their loans so if you want to set a targeted discount rate, you would have some idea of if that rate has a chance of being executed.
Lender Return Interest Rates Are Falling
As competition increases between the various peer to peer companies, I expect lender returns to fall. Assetz Capital lender rates have fallen since I first began investing. Rates of 10%+ used to be commonplace in the Manual Lending Investing account whereas now rates of between 4.5% to 8% are becoming the norm. The discontinued 2nd series of the GBBA account product saw a rate reduction from 7% to 6.25%.
Low Provision Fund Balances
Three of Assetz Capital current accounts (Quick Access, 30 Day and 90 Day) and one discontinued account (GBBA) offers investors an added layer of safety by providing funds up to a specified percentage of the total investments held in each account in case loan payments are late, missed or capital losses occur due to loan defaults.
The issue with these provision funds is they are a relatively small % of coverage versus the outstanding loan amounts so one large defaulted loan could essentially deplete an accounts entire provision fund.
The fund coverages have fallen during the economic fallout due to Covid-19.
Note that the Provision Fund balances show the current cash available and don’t include any monies that have been allocated to troubled loans.
Auto-Invest Accounts Don’t Always Result In Good Diversification
As convenient as the hands-off accounts are, your funds may not be well diversified. Accounts such as the Great British Business Account (GBBA) only hold loans which meet certain criteria. This means not all Assetz Capital loans meet the GBBA standards so loan availability can be limited. This then means that your allocated funds can only be invested into loans that are available and could essentially mean that if only two suitable loans are available, your entire account could be invested into those two loans. From a diversification standpoint, this isn’t ideal. It would be nice if, in future, Assetz Capital allowed lenders to set a maximum allocation percentage allowed into each loan.
You May Have To Discount Your Loans To Exit Them
If you decide you want to completely exit Asstez Capital by selling your manual loan portfolio, you may have to discount some of lower demands loans. This is especially true during the Coronavirus crisis.
In the case of the auto-invest accounts such as the GBBA, you may find that a portion of your funds remain unsold due to them being invested in loans that are suspended and in default recovery. This is purely based on demand and supply and if there are other investors willing to purchase your loans.
To maximize your Assetz Capital returns, you could use the Manual Investment Account which requires research to filter out the lower-quality loans. The problem with this strategy is most investors (including myself) have no idea what a good or bad loan propositions looks like. Peer to peer companies like Asstetz Capital experienced defaults on their loans and if they can’t always choose good loans, you probably won’t be able to either.
Remember, the company provided accounts and valuations can be subjective and sometimes inaccurate. I do however think Assetz Capital’s credit team provides a high level of screening of businesses to make sure it presents favourable loans to its peer to peer lenders. If you don’t want to spend time reviewing businesses, either spread your money across as many loans as possible or opt for the other hands-off access accounts.
Investing in business loans is very tricky as risk evaluation is only for the advanced investor and time-consuming. Honestly it’s not something I enjoy so when I used to do manual lending, I placed my faith into Assetz Capital’s team and chose loans that made sense on paper and that were secured by first charge properties. I looked for adequate loan security with a fair loan-to-value ratio (under 70% on residential property and lower on commercial). Even using this strategy I experienced a good number of defaults. Thankfully these defaults were on older loans that had paid down most of the loan capital.
I stayed away from loans secured by second charges as default repossessions on these can be tremendously problematic. Now I favour the access accounts (QAA and 30 Day) for strictly hands-off investing.
The Assetz Capital Review Conclusion
During the Coronavirus pandemic, I wouldn’t blame anyone for waiting until normal economic market conditions return before investing in peer to peer lending however I believe Assetz Capital is one of the companies well-positioned. Assetz Capital is Government approved to offer CBILS (Coronavirus Business Interruption Loan Scheme) loans which include BBL (Bounce Back Loans) loans.
While peer to peer lending investors cannot directly invest in CBILS loans (government rules, not Asstez Capital’s), investors will be happy to know that Assetz Capital will bolster their revenues by underwriting these government-backed CBILS loans, therefore making the company more financially stable. Asstez Capital will continue to offer peer to peer loans to regular investors like you and I.
During normal economic conditions, Assetz Capital provides a diverse array of peer to peer lending accounts, loan offerings, competitive returns, securitization of loans, competent default recovery, options and a strong business structure and fundamentals.
I like the fact that the team continually monitors and stress tests loans to reduce default possibility. Being able to preset funding allocations for new and existing loans is a big time saver.
I’m not a fan of the new 0.9% annual management fee that began on May 1st, 2020 and I hope this fee is temporary and will be removed once the economy settles.
I’m happy to see the introduction of the QAA secondary which offers sellers exiting possibilities and buyers discounted deals. I would like to see the discount option offered on the 30 and 90 Day notice accounts.
For now, I’m happy with how Assetz Capital has handled its communication and business during the Covid-19 pandemic and I will continue to invest.
How Do I Open An Account?
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** This Assetz Capital review is for information purposes only. This information is not financial advice and has been prepared without taking your objectives, financial situation or needs into account. You should consider its appropriateness for your circumstances. All investing carries risks. Opinions expressed in this review are opinions based on my own personal experiences. The FSCS does not cover peer to peer lending and your capital is at risk. Please don’t invest more than you can afford to lose. **