Monday 15 March 2021

TruePillars: A change to the way you invest

TruePillars was the first Peer to Peer platform I invested through. When I started, their offerings were based on investing in the available pool of individual business loans, with contributions into loans with as little as $50. TruePillars has now added pooled investing to the options available to investors with the pooled investing fund going live in March 2021.  This change has resulted from feedback from investors over the last few years and looking at how best to create a sustainable business model.  

While I like this concept of investing in individual loans, this only works well when there are plenty of loans available to diversify your risk.  Individual loan investing typically has a higher risk associated as you have direct exposure to default, and the increased risk of “cash drag” (a positive balance in your account but nowhere to invest the returned capital and interest) when the demand for loans exceeds their availability.  While you may receive higher interest returns on the cash you have invested, this is offset somewhat by the defaults and cash drag. I have noticed this in my own portfolio over the last 12 months during the COVID-19 pandemic where there have been a lot less lending, some businesses either going into default or on extended repayment holidays with the biggest impact coming from cash drag.  

While I have sufficient diversity in my portfolio to continue to give a positive overall result, I can see how a small portfolio of loans could be significantly impacted.  This is because the less loans you have exposure to, the more risk a single default has on destroying any gains the overall portfolio has achieved.  

Pooled Investments

The premise behind pooled investments is to remove some of the risks behind the diversification problem (risk of default) and the cash drag problem. To accommodate this TruePillars have adopted a model where investors funds are pooled. TruePillars then uses the pooled funds to issue loans to multiple businesses. This gives you diversification from a single investment and removes the cash drag as you are earning interest on the full invested amount allocated in the pool. To address the risk of default, the pooled investment funds will have a Loss Reserve attached to the fund that will supplement any defaults while there are funds available in the Loss Reserve. The pooled investments have three options of differing duration and expected rates of return.


Investment Period

Expected Returns

Minimum Investment


30 Day Rolling

4.35% net p.a.*



12 Months

6.10% net p.a.*



36 Months

8.10% net p.a.*


* Net of the impact of borrower defaults and all fees and costs, excluding tax.

To see the latest stats of the TruePillars fund you can find them here (scroll down the page).  Note at time of posting this blog, the fund had just gone live and thus stats updates were pending.  As a starting point TruePillars have contributed 500K to the Loss Reserve. Given this is a new funding model, the expected returns are all indicative. 

The pros and cons

Pooling investing gives several positives for an investor.  It gives a new investor on the platform instant diversification and can allow them to have all their capital earning interest once it is accepted into the pool. The added loss reserve also adds a layer of protection (not a guarantee) that your income will not be impacted by any defaults in the fund. It also gives people a very hands-off investment for those who wish to have little involvement.  

On the flip side some of the negatives I see is that potential returns will be lower overall.  The loss reserve and diversification to combat cash drag comes at a cost of potential returns of selecting individual loans and managing available cash. 

While my preference is individual loans, I am happy to give it a go having moved my spare cash into the pooled investments to keep my capital working.  I will endeavour to keep people updated on how the fund is performing against targets and compared against my portfolio of individual loans still held on TruePillars. Before investing ensure you read the PDS documents that can be found at the bottom of the TruePillars website.

Let us know your thoughts on the new funding model and if you like or dislike the new setup.

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