31st October 2018
In line with our ethos of transparency, Crowd2Fund has released data on how the funds of our investor base are performing. This follows other recent transparency initiatives, such as publishing our loan book and fund statistics in full, alongside detailed information on how the company identifies and manages defaults.
Why is investor data useful?
While loan book data provides insight on a loan-by-loan basis, it assumes that all investments on the platform are diversified and weighted equally in all listed campaigns. The benefit of publishing investor data is that it provides a set of segmented metrics to inform current and potential investors on the realistic levels of return on the platform. This empowers them to make informed investment decisions and allows existing investors to benchmark their own APR return against their peers’.
Additionally, publishing investor data helps Crowd2Fund align with the FCA’s recommendation for debt-based crowdfunding platforms to let users know about associated risks. Investor data, both as a single data source and combined with best and worst-case modelled scenarios, considers the full range of different APR returns.
80% of all investors outperform the best-case modelled scenario
The best-case modelled scenario for September (which assumes missed payments are collected and no further defaults occur) is 8.45%. The top 1%, 10%, and 20% of best performing investors on the platform are currently generating respective APRs of 8.60%, 8.53%, and 8.51% after fees and bad debts.
Even the top 50% and 80% of investors segments are also beating the best-case scenario, generating an APR of 8.50% after fees and bad debts. These findings indicate that while the best-case modelled scenario may look ambitious, it is not only achievable but in many instances, beatable.
Mitigating losses
Investors losing funds may be able to generate future returns by diversifying their portfolios and spreading their money into a variety of different campaigns across different sectors. This is a strategy adopted by many of the best performing investors, often investing small amounts into all campaigns. They may then deploy larger amounts into those campaigns they like the look of, as well as those with higher APRs that show no history of defaults. Another solution is to sell underperforming loan parts on the Exchange and redeploy funds into new campaigns.
Investor data shows the robustness of model
Our new investor reporting should give users extra comfort in the robustness of our modelling as the current data set reveals four-out-of-five users are generating an APR over 8.5% after fees and bad debts. While debt-based crowdfunding inevitably carries risks, these levels of return are significantly higher than those offered by savings accounts and cash ISAs.
With less than six months to go until the end of the tax year, potential investors may want to consider opening up a Crowd2Fund IFISA to take advantage of its tax-free benefits.
Please note, past performance and forecasts are not reliable indicators of future results.
