Author Topic: Funds or DIY  (Read 13264 times)

AnilG

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Re: Funds or DIY
« Reply #15 on: August 04, 2015, 01:56:52 PM »
Be careful with the assumption of immediate redemption with Fund. Most funds have redemption condition of best effort basis. Redemption is not an issue during normal times when fund cash inflow and cash receipts from investments exceed the redemption requests. In situations of large redemption requests, funds will throttle redemption amount and spread redemption across multiple periods to avoid impacting the performance for existing investors.

Automated lending is a "passive" strategy and can be implemented cheaply. Most funds go beyond passive automated lending and actively manage the portfolio including modifying loan selection criteria and leverage based on macro-economic environment, securitize and sell portfolio loans, and exposure to platforms not open to retail lenders as well as whole loan programs, etc.

Obviously automating the process is the way to go. I had someone code a PHP script for me to run automatically and it is behaving beautifully. It also took the 45 minutes and cost me almost nothing.

However the beauty of a Fund is that if you ever need to get out immediately, the fund is the only one that can possibly accomodate.
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Fred93

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Re: Funds or DIY
« Reply #16 on: August 04, 2015, 02:09:55 PM »
For example, a $50M fund will generate $500,000 (1%) in management fees and with 10% annual performance another $500,000 in performance fees. Most of these $1M revenues will go toward operations and compliance expenses. Unless you manage several hundred million dollar worth of fund, it is not financially viable to manage an active fund with less than 1% fees.

I know.  It is difficult.  That's a fine argument for not going into the small fund business.  It is not an argument for paying such fees.

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Anyway, most fund customers are UHNW or accredited investors and not DIY. Typically their time is worth more than the money they will save with DIY.

:-)  And my neighbor hires a gardner, and then goes to the gym to get her exercise.  I DIY.  The concept that rich people want to have things done for them, or are stupid, is a horrible stereotype.

Half Right

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Re: Funds or DIY
« Reply #17 on: August 05, 2015, 09:21:01 AM »
Agree with you totally Fred. I currently have almost equal amounts in Lending Club and LC Advisors funds. The portfolio in Lending Club is currently beating the return in LC Advisors and yet both require no effort. The difference may partially be attributed to the fees of Advisors.

On the other hand I have been able to liquidate out of a fund in one shot, and cannot see selling out on Folio without taking a big hit

Fred93

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Re: Funds or DIY
« Reply #18 on: August 05, 2015, 02:40:29 PM »
On the other hand I have been able to liquidate out of a fund in one shot, and cannot see selling out on Folio without taking a big hit

This is an advantage of the fund.  Absolutely.

The only reason they are able to do this is that they have people lined up who want to get in, and they just swap the next guy's money for yours.  Charles Ponzi would call this "liquidity".  I call it a "fair weather" advantage.  In a crisis, when more people want out than in, this advantage will disappear.

rubicon

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Re: Funds or DIY
« Reply #19 on: August 05, 2015, 06:23:41 PM »
I invest in both funds and directly on LC.

1. One strong reason for investing in a fund is to get higher liquidity. I am fully aware that liquidity depends on the pipeline (P&I and new subscriptions) but it can potentially get me out quickly if I need the cash. Don't think I can liquidate a large amount on folioFN without a steep discount.

2. Another reason is that the fund can ramp up much faster than I can on the retail side. It would probably take months to buy in the amount I have invested on the fund side.

3. Funds can offer 2 -3x leverage that it's very difficult to access as a retail investor.

4. A very small issue is that the fund is in a remote bankruptcy vehicle, which helps a bit but as I said I'm also invested directly.

Fred

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Re: Funds or DIY
« Reply #20 on: August 06, 2015, 12:23:23 AM »
the ability to liquidate your entire balance in a one month period makes it totally worthwhile.

At par value?  Which funds?

Fred93

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Re: Funds or DIY
« Reply #21 on: August 06, 2015, 02:18:55 AM »
3. Funds can offer 2 -3x leverage that it's very difficult to access as a retail investor.

What funds offer 2-3x leverage on LC notes?

rubicon

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Re: Funds or DIY
« Reply #22 on: August 06, 2015, 12:20:24 PM »
funds generally diversify across platforms so I don't think one would necessarily limit itself to LC.

There are even funds that securitize the loans keeping the remaining equity tranche

rubicon

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Re: Funds or DIY
« Reply #23 on: August 06, 2015, 12:25:22 PM »
one downside to funds though is that it complicates your tax filing because you're investing as a limited partner in a tax passthrough vehicle.

Fred93

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Re: Funds or DIY
« Reply #24 on: August 06, 2015, 02:31:54 PM »
funds generally diversify across platforms so I don't think one would necessarily limit itself to LC.

There are even funds that securitize the loans keeping the remaining equity tranche

I note that you didn't answer the question.  I don't know of any leveraged P2P loan funds.  Perhaps there are some.  You listed this as an "advantage", so I want to know if you know of any, or if you made up this "advantage".


Fred93

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Re: Funds or DIY
« Reply #26 on: August 06, 2015, 04:02:29 PM »
Ok, you're getting closer.  I note that neither article actually mentions a specific fund that does buy P2P loans with 2x or 3x leverage.

The 2nd article comes close
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Eaglewood, which has put about $80 million to work in P2P lending so far, can leverage its fund 3 to 1, depending on
They've just looked at words in an offering memorandum.  Note the word "can".

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Disruption Credit, according to Jones, is planning to raise a $75 million fund to invest in P2P loans, and will then borrow another $425 million so it can buy $500 million worth of loans.
Note words "planning to"  and "will then". 

I dunno.  Perhaps there are some out there, but it certainly isn't clear.

In any case, this isn't an "advantage" for the general person deciding whether to invest in a fund (that somebody actually knows about) vs DIY.

rubicon

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Re: Funds or DIY
« Reply #27 on: August 06, 2015, 04:18:17 PM »
erm...what does securitization mean to you?

Fred93

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Re: Funds or DIY
« Reply #28 on: August 07, 2015, 02:24:52 AM »
A birdie told me that Blue Elephant's P2P fund is leveraged.  I thank the birdie.

lascott

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