It is hard to believe another year has gone by. While I have been quiet on the blogging front, my peer-to-peer portfolio has been ticking along in the background. Last month even saw the portfolio extend to a new peer-to-peer platform (more on that in a future post). With COVID-19 still wreaking havoc around Australia and the world, I thought it would be good to provide an update on how the funds have performed over the previous 12 months. Each platform has an individual performance update with a combined portfolio summary at the end.
Early last year TruePillars changed the way people can invest on the platform, creating pooled investment options (GO – 30 days; FLOW – 12 months; and POWER – 36 months). Since that time the have been no new individual loans listed (although there has been residual activity on the secondary market). As a result of this, the portfolio of individual loans I now own has dropped to 53 loans, down from 137 this time last year. As these loans have been paid out, I’ve transitioned to moving the funds into mainly the Power loan, but also put small allocations to the GO and FLOW options, just to track actual performances down the road.
The combination of the interest from both direct loans and pooled investments resulted in an overall return of 8.3% for the year. Taking into account the three defaulted loans that were finalised and written off during the year, the overall return drops to 7%. It was noted that the monthly returns have been declining as more of the investments move to the pooled options. I expect this to stabilise this year with only 18% now invested in direct loans at an average net yield of 9.7% against the pooled return of about 7.8%.
There are some losses I am expecting to see come through on remaining direct loans investments. Seven loans (totalling 1.7% of my investment in TruePillars) are on agreed loan deferrals. This number has been fluctuating during the year depending on COVID out breaks, and trading restrictions placed on small businesses.
In addition, there are four loans (totalling 1.3% of my investment in TruePillars) listed with a default status. Two of these are paying back ad hoc, with repayments from these two loans currently been applied directly to remaining outstanding principle. The notes on these two loans are once principle is fully returned, future payments made will be applied to interest accrued. That is under the provision the businesses continue to operate (these two loans are currently sitting at 0.4% of my TruePillars portfolio).
The third business has closed its doors with the outstanding loan flagged as potential full loss (0.2% of my TruePillars portfolio). The final is entering voluntary administration with negotiations on the debt to be finalised (potential loss of 0.5% of the portfolio). These losses will be captured in my returns as they are finalised.
This platform continues to be a consistent earner achieving annualised returns of 12.14% over the previous 12 months. I have continued to watch bad debts which appear to have remained consistent throughout the year and started to come down a little from a high of 6.7% to end the year at 6.3%. It’s something I continue to watch as I know this is the is the number that has the potential to impact current returns.
The returns over the previous 12 months have been 6.2%. However, this number is trending down as new loans over the last few months have invested at rates around the 3% mark. I expect this will continue to have an impact as loans are paid out and reinvested at much lower rates.
From a platform perspective, the provision fund has continued to support investors against all defaults / late payments. At time of writing, the provision fund has expanded to 206% of expected defaults (157% 12 months ago) with the latest fund provision coverage found here.
This platform provided a 9.3% return over the previous 12 months. As per my previous year’s commitment, I am no longer actively investing on the platform and slowly withdrawing funds as loans are repaid. I did note that approximately halfway through last year the platform stopped investors from funding new loans under the guise that the website is undergoing upgrades. At time of writing this is still the case, with investors given the option to add new or withdraw available funds (Why people would add new funds at this point in time is beyond me).
The overall performance for the last 12 months has been 8.6%. I’m comfortable with the performance from a blend of the four platforms I’ve received to date. To keep track of the individual performance of each platform, I track them on a single graph (below) and then aggregate the results to give my overall portfolio returns.
It is important to note the Truepillars negative month is the net result of the write-off of defaulted loans in June 21.
For a year full of COVID-19 induced lockdowns and travel restrictions, the portfolio has performed remarkably well. 2022 is shaping up to be another year with COVID-19 providing challenges across the economy. This will continue to bring the risk of default to both small business and personal loans alike. These are the metrics I will continue to closely watch to understand the potential impact on my portfolio.