Access Accounts update
We have all witnessed the unfortunate stock market effects stemming from the uncertainty surrounding the virus. We expect this will continue at least to some degree before treatments and then the vaccine is announced in due course. We all know that this is being worked on at a pace and the announcement of either, or both, will likely remove the substantial uncertainty from the markets that has driven this recent volatility and let us all move on. We hope you all stay safe during this time.
We are a relatively stable asset class and have delivered strong and stable income across our whole loan book every year since we started, and with fixed interest rates on our loans to borrowers. Nonetheless past performance cannot guarantee future performance and whilst we expect our lender interest to continue to be paid as normal, we saw an imbalance in withdrawal and deposit activity manifest itself on Thursday 12th March 2020 that was potentially becoming a trend so we decided to act quickly for everyone’s protection and we now class the situation as no longer “normal market conditions”.
The current uncertainty has also created many, much larger challenges in other markets. Large capital losses in the stock market have already happened, indeed the markets have been closed to trading more than once in the last couple of weeks. We have also seen a substantial bank interest rate cut to near zero that is unlikely to be reversed for some time and may well have further to go.
For our platform, we didn’t have those sort of huge changes happen but we did see an imbalance created on Thursday 12th March 2020 between withdrawals and deposits that we had not seen before and couldn’t allow that to continue without a positive intervention.
From past investor feedback, we believe that we have had the leading liquidity (speed of sale of loan parts and withdrawal of cash) in the peer to peer market and have served well over £1.5bn of exactly on time investment withdrawal requests in less than one second of the requested time to date from the Access Accounts. This compares to reports of days, weeks or months to withdraw from our similarly large peers in this market.
Due to current circumstances, we have taken the prudent decision to move our Access Accounts, for the time being at least, to a similar queueing system that has mostly been used by others. This will better match buyers and sellers in this unusual period and is now in operation. We cannot predict withdrawal speed at present, but we will display it once there is enough data.
This Access Account change does not affect target rates of return, nor withdrawals from your cash account nor secondary market trades, they all work as before. This is a change that solely affects the speed of sale of your investments and subsequent withdrawal of funds from the Access Accounts. It was a necessary change as the investments underlying the Access Accounts have remaining terms of a few days to 5 years and liquidity is only possible if there is balance between buyers and sellers, something many markets have lost from hand gel and toilet rolls to shares.
New Access Account withdrawal requests can be submitted to join the queue. All existing QAA, 30 Day Access Account and 90 Day Access Account withdrawal requests are still queued in the order they were requested, and their position will be honoured.
Thank you for your understanding.
(We will be updating this blog regularly and will also be adding in frequently asked questions to explain further details, so please check back here if you have further questions in the first instance.)
Frequently Asked Questions Regarding the Access Accounts in the Current Market Conditions:
(Last updated 15:21 30/3/20)
Why have changes happened?
The impact of the Coronavirus on financial markets and investor thinking has meant that the previously highly efficient liquidity of the Access Accounts is presently unable to work as well. The Access Account withdrawal queue system has been introduced to allow withdrawals to continue in a fair and timely way, albeit more slowly than you have been used to for the time being. We have seen unprecedented borrower demand as well as some heightened investor withdrawal requests and we needed to make changes for this temporary period. Other parts of the system such as new investment into the Access Accounts, withdrawals from your Cash Account and investment in the Manual Lending Account continue as normal.
What are ‘Normal Market Conditions’?
We define ‘Normal Market Conditions’ on the Key Account Information for the Access Accounts - https://www.assetzcapital.co.uk/invest/our-accounts/quick-access-account/key-account-information.
The Coronavirus has created a situation where ‘Normal Market Conditions’ are no longer in effect, at least for the time being.
What is the Access Account withdrawal queue?
The Access Accounts withdrawal queue is necessary for this period where Normal Market Conditions do not apply as it is not possible presently to process all withdrawal requests immediately as they are made (for the QAA) or as they fall due (for the 30DAA and 90DAA) as well as handle our commitments to our borrowers.
You enter the Access Account withdrawal queue when you submit a withdrawal request or your withdrawal request falls due. You are then added to the withdrawal queue along with any other people who still have any unfulfilled withdrawal requests pending.
Please note that the ‘Invest Idle Funds’ function has now been temporarily paused. If you turned it off previously then this will have resulted in the invested funds being added to the withdrawal queue at the time that “Invest Idle Funds” was switched off and so will not provide instantaneous withdrawal as it has previously.
During this period of financial turmoil, we have temporarily altered the way in which the queue is processed. We have done so in line with section 20 of our Terms & Conditions which allows us to make changes if we reasonably believe them to be in the interests of the Lending Members, which we do here in the context of our Lending Members as a whole. Given the rapid onset of the current national and global crisis, it simply was not possible to provide 30 days of notice.
The “pool” of uninvested cash in the Access Accounts belongs to all the investors in the account – everyone has the same proportion of their funds allocated within the Access Accounts that is partially held as uninvested cash. It would not be fair to other lenders in the Access Accounts to grant any one person disproportionate access to the uninvested cash so all queue members will be treated equally until further notice - joining the queue today versus tomorrow will not create a significant advantage in the short term.
The queue now operates using the same distribution as the Aftermarket. This distribution method divides the amount to be distributed equally amongst all lenders on a per withdrawing account basis. If a lender is allocated more than they wish to withdraw then the excess is distributed equally amongst those who wish for more. Effectively it will try to fulfil withdrawals from the bottom up based on size.
If we had not done this, it is conceivable that a few larger withdrawal requests could completely congest the queue for a period, making it impossible for the vast majority of lenders to access their proportion of the uninvested cash or, indeed, realise any of their investment relatively quickly. It also prevents “gaming” of the system whereby some investors could place an artificially high withdrawal in an attempt to gain a disproportionate withdrawal amount to the detriment of others.
In the fullness of time, as the situation stabilises and liquidity is restored, we intend to switch back to processing the queue in the order in which withdrawal requests were made. At that time, requests will be fulfilled in the order specified by the queue, with amounts not already received during the pro-rata period being paid before moving on to the next request in the queue. We cannot give an indication of when this will happen at this stage as it depends on a degree of balance being restored between withdrawal requests and funds becoming available to service them. We will continue to update this FAQ with new information when we have it.
We would like to assure you that we are working extremely hard behind the scenes and making all reasonable efforts to preserve and enhance liquidity. However, you will appreciate that there are many factors related to Coronavirus and its associated measures which are entirely beyond our control. We ask that you bear with us as we, and the country as a whole, look forward to a return to normal market conditions.
When will withdrawal requests be able to be placed on the QAA and other Access Accounts?
You can give notice on the 30 Day Access Account and the 90 day Access Accounts as normal right now and as those notice periods expire you will either receive the withdrawal if cash is available to do so or enter the queue at that time.
A withdrawal instruction on funds “Directly” invested in the Quick Access Account will also place you immediately in the queue at the time you request it.
The “Invest Idle Funds” feature has been temporarily removed and any funds you had in the QAA via this mechanism are now in the account as “Direct” investment. To join the withdrawal queue, you must place a manual withdrawal request from the QAA. If you previously turned off “invest idle funds”, prior to the removal of the feature, the funds associated with that mechanism will already be in the queue. The queue is working now, and some funds have been released from the Access Accounts.
I had some normal Cash Account
withdrawals delayed, when with those be paid out?
Any normal withdrawal requests for cash that were not monies held in the Access Accounts in any way have now been released. Cash account withdrawals will continue to be processed as normal going forwards.
We apologise for the workload in the finance team at this very busy time having delayed those but we would not compromise or shortcut security checks to make that faster so the whole batch was paused unfortunately until the proper process could be applied.
When will queued withdrawal requests from the Access Accounts be able to be processed and paid into peoples’ Cash Accounts ?
The updated queue system for Access Account withdrawals restarted on Thursday 19th March at 8.40pm. When you receive cash from your withdrawal request from the Access Accounts will depend on cash coming into the Access Accounts from various sources and is not able to be predicted at this stage.
What is the speed of withdrawal likely to be when withdrawals restart?
We cannot forecast that yet, but we will calculate and publish average withdrawal times from the withdrawal queue once there is enough data for that to be useful.
Why can’t I just have my cash back by selling my investments immediately as I used to do?
There is not presently an excess level of inbound deposits versus withdrawals to permit the rapid withdrawals that we have delivered every minute since the Access Accounts originally opened. This is due to these no longer being normal market conditions, as we always highlighted could happen from time to time over the years at moments of market volatility and similar. The design of our Access Accounts remains market leading, so much so that in normal market conditions they did not need to await specific new investments into an account to permit immediate withdrawals by other investors. Unfortunately, we are not presently in normal market conditions due to the market confusion created by the Coronavirus. Presently, the accounts that you are invested in will receive cash from several sources including from new investments by other investors as well as loan interest, repayments and monthly amortisations from borrowers. All of these will contribute to queued withdrawal requests being fulfilled.
When will the withdrawal times revert back to being instant again as they were?
We cannot forecast this at present as it is significantly dependent on the current economic conditions calming down.
What happens to any 30DAA or 90DAA account withdrawal requests I had already submitted?
They will join the queue when the relevant notice period expires.
What interest rate will I receive on my 30DAA & 90DAA funds whilst they await release beyond the standard notice periods?
As previously, target rates remain capped at 5.1% p.a. on 30DAA funds and 5.75% p.a on 90DAA funds.
In terms of all target rates, please note that there is no way of predicting exactly how much interest will be paid by our borrowers in the coming weeks as they adjust to this new reality and grapple with the challenges.
How does the ‘Invest Idle Cash’ function now work?
We have made the decision to temporarily pause the ‘Invest Idle Funds’ function at this time. Whilst withdrawals from the Access Accounts have resumed and moved to a queuing system, we feel that temporarily pausing this function will simplify our lenders’ experience whilst we are no longer in normal market conditions.
This also prevents a situation where money returning to a lender’s account may be swept into the Access Accounts at a time when withdrawals are operating more slowly than usual, if that lender had not switched off ‘Invest Idle Funds’
The “pool” of uninvested cash in the Access Accounts belongs to all the investors in the account – everyone has the same proportion of their funds allocated within the Access Accounts that is partially held as uninvested cash and that is a design of the system. It would not be fair to other lenders in the Access Accounts to grant any one person disproportionate access to the uninvested cash and this is why withdrawals were paused at a certain level when it seemed that this may happen and the new queueing system has now being switched on to maintain fairness. We are also working on a way to let investors choose to permanently leave the Access Accounts with both their share of the uninvested cash and their loan investments if they so choose and we will advise on this new function shortly. That would immediately release the correct proportion of cash held in the Access Accounts in your name to be immediately taken to your Cash Account and withdrawn if required and the rest of your loan investments would repay according to the actual repayments made by the borrower. Those loan agreements would be able to continue to benefit from the relevant Access Account provision fund. We can also confirm that all Access Account loan holdings are available for purchase as usual in the Manual Lending Account and any purchases there would bring cash back to the Access Accounts that would add to the available cash sum to fund withdrawals under this new option or would be available for use in the withdrawal queue system.
Do capital repayments in full, or part, or where a loan has regular repayments of capital, contribute to withdrawal requests from the Access Accounts?
Yes, they do, however please be aware that, at the time of writing, it appears that many banks and other major alternative lenders have suspended funding new loans. This means that we are experiencing reduced loan redemptions in full compared to what was previously expected to have made up a substantial amount of the cash for withdrawals. Therefore, capital repayments are no longer at a material level at this time.
When did normal market conditions end?
The financial markets had particularly excessive volatility on Thursday 12th of March. In addition, our analysis of the Access Accounts’ behaviour confirmed that normal market conditions had ended suddenly on Thursday 12th of March and so the withdrawal system operation for Access Accounts did not operate that day and will not operate in the original way until further notice whilst the unfortunate effects of the Coronavirus are handled by our Government in due course.
These FAQs will be updated - please check back if you have unanswered queries.
- March 13, 2020