Statistics and Investment Performance

BondMason's clients have achieved a gross return in excess of 8.0% p.a. in 2015*, 2016 and 2017 (*part period). Here's an overview of the underlying loans and latest performance data. 

TOTAL INVESTMENT
Invested over £35m on behalf of our investors since 2015.

We have experienced a steady inflow of investment from new and existing clients enabling us to grow month-on-month, year-on-year.

Retail and institutional deposits are aggregated and deployed into various lending opportunities including residential / commercial bridging and development opportunities, corporate loans and invoice discounting.

To date, we have invested over £35m on behalf of our investors.

Investments have been made on 33 platforms across the Peer-to-Peer and Direct Lending market.

Total Investment Figures
RISK

Security, borrower types, platform concentration and exclusive access

Loans by security chart
Security
Division of loans by security type.

Typically between 75-80% of underlying loans are secured by UK property via a first or second ranking charge. The remainder of loans are secured by other assets such as debentures, floating charges and personal guarantees.

Debentures and floating charges provide a broad based security against the shares of a company or a general pool of assets. Directors of the borrowing company or the individual borrower may guarantee a certain level of payment if the company cannot make payment on a loan.

Whilst property charges are more appropriate for the recovery of assets in the event of default, personal guarantees are useful in aligning the interest of borrowers and their owners / directors.

Additional work is undertaken by BondMason to determine whether the security designations from each underlying platform are adequate before allowing Receivables to be sold against the underlying loan through BondMason.

Platform concentration
Diversification across lending platforms and partners.

A core function of the Investment Team is the selection of lending partners.  Over 100 lending partners (Peer-to-Peer and Direct Lending) have been assessed, with just 33 being selected as ‘approved’ lending partners.

To mitigate risk in a Direct Lending portfolio, we diversify lending across these platforms with no more than a 15% concentration in a single platform. Most platforms provide ~3-5% of total underlying loans that are assessed through BondMason.

For a platform to be accepted as a lending partner it is required to pass our rigorous due-diligence process. Once accepted, BondMason will continue to review our relationship with each respective Lending Partner and regularly review processes, procedures and lending patterns.

To mitigate risk in a Direct Lending portfolio, we diversify lending across these platforms with no more than a 15% concentration in a single platform. Most platforms provide ~3-5% of total underlying loans that are assessed through BondMason.

Platform concentration
borrower types chart
Borrower types
The composition of our loan book continues to evolve.

As the graph illustrates, property now equates to70% of our loan book; the balance being invested in a mix of corporate, invoice discounting and other asset backed opportunities.

 

 

We continue to exploit opportunities across the market and the loan book make up is likely to change over time, but we expect the property focus to continue unless there is a significant change in outlook or in pricing and risk metrics. 

So far, we have experienced no losses from underlying loans secured by property.

We tend to source property bridging finance as opposed to the riskier property development finance. This reflects a conservative focus to the approval of underlying loans.

Exclusive access

BondMason has established relationships outside the peer-to-peer lending industry with Direct Lending platforms that originate high-quality loans with attractive, risk-adjusted returns.

 

Traditionally, the Direct Lending market had high barriers to entry for the retail investor; typically only High-Net-Worth and Institutional Investors had access to these markets.

 

As we have gained entry into this space, our retail investors now have access to these markets and loan opportunities they would not have been privy to before. We will continue to grow and develop relationships with other operators in the Direct Lending sector.

 

Our focus over 2017 was to increase the number of Direct Lending Partners we worked with; as at 1 March 2018, this equated to 33%.

exclusive access chart
RETURNS

Loan rates, defaults and cash drag

Loan rates
A balanced approach to pricing and risk.

Underlying loans are assessed on a risk-adjusted basis.  A low rate does not necessarily mean the underlying risk is low, conversely higher rates may not necessarily compensate adequately for a step up in the level of risk being taken. 

We take a balanced approach towards pricing and risk with a tendency to focus on the conservative end our target market.

The weighted average rate being received per loan opportunity decreased from 9.4% to 9.2% from 2016 to 2017. This in the main was a result of a decline in the rate being offered on invoice discounting loans.

Having experienced some losses in the early days due to more risky invoice discounting loans, we have developed new relationships with more established invoice discounting partners.

rates by loan type chart
losses chart
Losses

Losses are disappointing, but unavoidable in lending. Since inception, the total write-off rate is just 0.2%, with a further 1.2% currently in recovery. 

Overall, we expect a loss ratio of 0.5% to 2.0% p.a. across the portfolio. This is typically higher for invoice discounting finance and lower for property finance

As at 1 March 2018, ~91% of our loan book is performing as expected. 6% of loans have been placed onto our ‘watchlist’ as we believe they are loans that require closer monitoring.  

The vast majority of loans on our watchlist go on to be fully repaid and the watchlist reflects our conservative and prudent attitude towards lending.

LIQUIDITY

The term of a loan and whether it repays over time (amortising) or all at the end of the term (bullet) are key considerations when making a loan investment. Repayment loans should have reduced risk over time, assuming that repayments are being made in full and on time. 

BondMason liquidity
Term and client liquidity

The average remaining term of the underlying loans is currently 9 months. This enables us to provide good liquidity to clients if they want it.

It also enables our client to create a portfolio of loans which can be re-priced relatively quickly, for example in the event of a rise in inflation.

We aim for clients to be able to sell their positions promptly in the event they would like to exit some or all of their holdings.

In most cases clients have been able to fully liquidate within 24-48 hours, although liquidity isn't guaranteed.

We hope you've found this information useful

If you have any questions, we're happy to discuss our approach and the performance clients can target.

Please email the team at invest@bondmason.com or call us on 01582 820000

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