Ask our panel
We’ve introduced this feature to enhance our communication with our investors and give you the opportunity to directly ask the questions that are important to you.
Our specially selected panel have been answering your questions and you can now view them below. As some of the questions were similar in content, we've edited them to avoid duplication of responses.
If you would like to ask our panel anything, then please submit your question via firstname.lastname@example.org and we will try our best to answer it. If this feature continues to prove popular, we'll explore how we can expand and improve it going forward.
Thanks for all your questions so far.
Q: I submitted a withdrawal request from my 30 Day Access Account in April and I’m still waiting. When will this be returned to my bank account?
Whilst we’d like to be able to provide information on the expected completion date of your withdrawal request, it’s just not possible based on the data currently available. This is because the main influencing factor on speed of withdrawal is the appetite from other investors to buy your loan holdings.
Withdrawals have always been primarily facilitated by other investor demand to buy your loan parts, earlier than loans naturally pay back. Withdrawal speeds are dependent on a degree of balance being restored between withdrawal requests and new funds being invested in the accounts. Presently, any withdrawal requests that you have for any Access Accounts that you are invested in, will have that request fulfilled from new investments by other investors (with new investment taking advantage of any discounts available in the market first) and by some of the loan redemption payments received from borrowers. In the meantime, we continue to pay the advertised target interest rates and expect that to continue based on what we know at present.
Like other investments in illiquid underlying assets, we certainly have slow withdrawals at present, but we continue to work hard in the background on new initiatives to improve the speed of withdrawals from the Access Accounts. We expect the accounts to be liquid for much of each economic cycle, but to see slowdowns with respect to withdrawal times in the more difficult period at the end of each cycle. We expect that liquidity will return in the future once investor appetite to deposit funds into the Access Accounts returns.
Q: I asked for a refund of my total deposits in May 2020. I have asked a number of times for progress, only to receive a verbose and complex financial reason why a refund cannot be made! Clearly Assetz Capital is very stable & viable and my sum of £5k will hardly jeopardise that position?
It is important to understand that when investing on the platform you do not lend your money to Assetz Capital and as such we don’t hold your funds, which means we don’t have them to give back to you on demand. We understand that there are some investors who may have urgent liquidity requirements, but it is essential that we treat all lenders fairly.
Funds invested in the Access Accounts are lent out across a diverse range of peer-to-peer loans and therefore cannot be ‘refunded’ as a priority above other people in the accounts who have also lent money to borrowers via the account mechanism. Whilst historically the Access Accounts have enjoyed excellent liquidity, due to the global impact of Covid-19 we are no longer in Normal Market Conditions. This means that there is not presently an excess level of inbound deposits versus withdrawals to permit the rapid withdrawals that we have historically delivered since the Access Accounts originally opened. We are doing all we can to return investor cash as quickly as possible for those who have requested it, whilst also respecting those investors’ views who wish to continue to invest and see the Access Accounts continue to actively produce their monthly interest for the foreseeable future.
Q: What’s the plan to get the Access Accounts moving again? Six months down the line I would argue this is the new normal market conditions as the true financial impact is yet to be felt.
We wouldn’t agree that investors wishing to disinvest and go to cash is a ‘new normal’ and instead reflects these difficult and uncertain but also temporary times.
Our reference to Normal Market Conditions is specifically related to the operation of the Access Accounts and is defined on our website.
We are currently looking into further new initiatives to both improve liquidity and hence withdrawal speed and possibly restart lending in the Access Accounts. This is important in order to keep the loan book fresh, improve diversification and ensure we are not in any kind of run off situation for the vast number of investors who are happy to continue to invest for much needed income.
In the end, the Access Accounts rely on net balance in investor withdrawal requests versus new investment and that seems to be mainly influenced by the path the virus takes and on the Government’s and peoples’ response to that. We trust that the target interest rates that we generate will soon again become very appealing to people versus a substantially and rapidly improved economy.
Q: Could you inform us what the cash position is for the Access Accounts, both currently and at the start of the pandemic. Also, how much exposure do the Access Accounts have to further tranche funding?
The Access Accounts (AAs) have always aimed to hold a proportion of cash to meet the liquidity needs of those investors wishing to make withdrawals and to facilitate the drawdown of new loans. At the beginning of the global pandemic withdrawal requests became much higher than in our normal course of business and when it became clear that we were no longer operating in ‘Normal Market Conditions’ (as defined on our website), we made the difficult decision to temporarily pause withdrawals from these accounts as the spare cash for serving withdrawals was being rapidly used up. At this point, cash balances held in the AAs had reached around £3m and since then have begun to recover strongly month by month, even with substantial loan tranches being paid out on existing loans over the months since March 2020 and also many millions of loan withdrawal requests being fulfilled. We are on a path to normalising the AAs, but we are not there yet, even with £26m cash balances now held in the AAs.
The AAs are made up of hundreds of property-secured loans, many of which are development finance. This type of funding is released in stages (or tranches) based upon the progress of the development. It’s important that we act in the best interest of all our lenders and borrowers and continue to fund future tranche drawdowns to enable the completion of the development and preserve the value of the loan security.
In May we were announced by the British Business Bank as an accredited lender under the Coronavirus Business Interruption Loan Scheme (CBILS). This has enabled us to offer CBILS loans to many existing customers who have future tranche drawdowns, providing they meet the criteria of this Government-backed scheme.
This, combined with substantial drawdowns already paid from the Access Accounts over recent months and also the growth in the cash balances of the Access Accounts today mean that all future tranche funding required from us is forecast to be covered and we expect to see that forecast proven over coming months. This means that we can now consider accelerating slightly withdrawals in the coming months but the primary liquidity for the latter will need to come from new investment if people wish to withdraw very quickly, as has always been the case with these accounts in Normal Market Conditions.
Q: Assetz Capital have used the term MOL (“Minimum Operating Level”) in relation to the Access Accounts in the past. Can you explain this in detail and how close the accounts are currently to this level?
We regularly review what minimum operating levels are in order for the Access Accounts to operate smoothly. This is managed by paying attention to various factors including future loan drawdown commitments, relative investor appetite between withdrawing and investing and expected loan redemption volumes over coming months, and the cash balance held by the AAs at present. This means that there isn’t a hard and fast cash balance for a significant period within the AAs that is the MOL but instead it is a more dynamic level derived from current market conditions and all the factors involved in how the accounts are prudently run.
For the MOL to return to normal levels we would need to see a number of factors all registering as healthy. This includes having a satisfactory Access Account cash balance both now and forecast ahead, as well as that potentially permitting new lending again from the Access Accounts. This would also require people having their withdrawal queue requests fulfilled at an acceptable rate again. We would also need to see continued healthy redemption levels looking likely over coming months and in particular strong confidence in future loan tranche monthly drawdowns that we have committed to being well covered. Several factors are moving in the right direction now or have already reached satisfactory levels, such as the anticipated fully covered future loan tranche drawdown position outlined in the question above.
We trust that we are on the journey to normal operations resuming in due course for the Access Accounts and that will then continue across the whole of the next economic cycle.
Q: What provision out of Assetz Capital's earnings is now being set aside to fund the Provision Fund (excluding lender fees or reduced returns to investors)?
Whilst Provision Funds (PFs) may be seeded by Assetz Capital itself when a new account is launched in order to provide some coverage straight away, we do not directly provide any additional contributions to the PFs and do not set aside our own earnings for that purpose.
The PF contributions instead come from part of the interest rate coupon paid by the borrower on an ongoing basis (above and beyond the target interest rate of the associated Investment Account) which serves to grow and/or replenish the PF over time. Our monitoring income on a loan, around 1% or so on average each year is consistent over the life of the loan. The whole of the remaining borrower monthly interest payments go either directly to investors or into the PFs if that interest receipt is above the target rate of the investment account.
In practice what this means for say the Access Accounts (AAs) is that, by way of example, if the average interest paid by borrowers is 7.2%, and the average interest paid by the AAs is 4% then 3.2% p.a. is going to the AAs PFs. The AA loan investments are around £190m at present, with around £26m uninvested, so in the example above this would mean that around £8.6m p.a. would be paid out to investors as interest and around £6m p.a. would be going into the PF. All of these figures assume that all loans are currently paying interest and a small percentage are not so the PF contributions above would be a little lower as a result but there is plenty of headroom to ensure that the AA target rates are presently expected to be continued to be paid to investors.
You can find more information about this here.
Disclaimer: The Provision Funds we offer do not give you a right to a payment so you may not receive a pay-out even if you suffer loss. The funds have absolute discretion as to the amount that may be paid, including making no payment at all. Therefore, investors should not rely on possible pay-outs from the Provision Funds when considering whether or how much to invest.
Please see also our Provision Fund policy
Q: There has been no new lending in the Access Accounts, and we have been told that this will continue until normal market conditions return. Assetz Capital have said "Normal Market Conditions for the Access Accounts will necessitate substantial capital inflows again rather than the opposite. Greater demand to invest than withdraw." Does the mean there will be no new access account lending until the secondary market is trading at par? What happens if this doesn't occur?
Assetz Capital have never stated that the Access Accounts will not resume new lending until we return to ‘Normal Market Conditions’ (NMC). The quote that you’re referring to relates to our definition of NMC in the context of withdrawals, which can be found on our website here.
We have always said that we need to look after and fund existing borrower commitments. We are getting comfortable that future commitments are fully addressed and this will be proven over the next few months. As things continue to normalise the prospect of new lending can be reconsidered and is highly desirable for the health of the Access Accounts and also contributions to their Provision Funds on an ongoing basis. This is important in order to keep the loan book fresh, maintain or improve diversification and ensure we are not in any kind of run off situation.
This is a key part of the way the Access Accounts work and is detailed in the key investor information section on the Quick, 30 and 90 Day Access Account webpages.
Q: MLA lenders are being unfairly treated by the lender fee, lenders investing in 5% loans are being charged a whopping 18% of their income. We were told the fee was to start on May 1st, but it was sneakily backdated to April 1st. It was supposed to reduce after 3 months, it hasn't. When are Assetz Capital going to treat lenders fairly?
We understand your frustration and can assure you that we did not take this decision lightly. The fees were implemented in what we feel is the fairest possible way to all lenders with funds under management on the Assetz Capital platform. The percentage charge could be calculated in a variety of ways but the loan interest rate does not directly reflect the work that we expect to do on a loan and so a flat rate seemed the fairest on balance.
As outlined in our communication to lenders on 30th April 2020, “the fee will be charged on 1st of the month, starting on 1st May 2020. It will be calculated throughout the month based on your funds under management but deducted as a reduction of the actual interest that you receive. The fee applies to your funds under management in the prior month.”
We have always said this is a temporary fee and will look to reduce and remove the fee as soon as we can, however at present we have not and cannot say when that might be. We will continue to review the situation and communicate any updates as and when we have them.
Q: What are you doing to increase diversity of staff at the different levels of the organisation?
Our people are the driving force behind Assetz Capital and we are committed to promoting and supporting diversity.
Whilst we have a diverse team at Assetz Capital and see the value such a team can add in terms of the different perspective, innovation and creativity, we still have more work to do. We see managing diversity as a continuous process of improvements and not a one off, tick in the box, initiative.
Improvements that we have implemented to date include:
- the launch of Assetz Academy which provides training and career progression to all employees and also helps with the hiring of less experienced staff who can then be coached and trained to higher levels of expertise. We expect that we will achieve greater diversity as an organisation as we grow this type of recruitment.
- creating / enhancing our policies so that they appeal to a wider group
- reviewing our job descriptions and adverts to ensure our approach doesn’t put any group at a disadvantage
- working with our recruitment partners to ensure they are aware of, and supporting our recruitment diversity goals
- developing an employee brand that showcases our diversity
Earlier this year we also appointed our first female board member, which we were delighted with but more so as it was also an internal promotion.
Whilst we see the benefits of having a diverse workforce internally, we also feel it's important that our team represents our diverse customer base, enabling us to provide you with the best possible products and services.
We also have an eye on diversity of our borrowers and already support healthy lending balances into ethnic minorities and their businesses, something that alternative finance generally performs well at.
Q: For a number of years you have given new investors preferential rates to the detriment of current investors; typically, an additional 1% for investing for 6 months. Presently you reward new investors with a 7.5 - 10% discount when investing in the Access Accounts. Have you ever considered rewarding loyalty giving long term investors or investors with greater amounts invested?
At Assetz Capital we’ve always been keen to reward both new and existing customers. Over the years we’ve run a number of new investment promotions which have proved very popular with our investors. So far, we’ve paid out over £1.8 million in cashback bonuses - the vast majority of which were paid to existing customers.
With regards to the Access Account Marketplace, it’s important to understand that the discounts available are set by individual investors based on their personal liquidity needs, not by Assetz Capital, and those investors are choosing to pay a fee to a new investor effectively.
We think rewarding the loyalty of existing investors is a fantastic idea and we’re currently looking into how we can best do that as it seems a very fair thing to do for the huge number of investors wanting to continue with our investments and grow them. We’ll communicate our plans with investors in the coming months, but we’ll also be reaching out to investors to get your thoughts and opinions - so keep an eye out for that.
Q: Does Assetz Capital conduct any sort of "lessons learned" reviews and if so can these be published in full or part? There have been a number of difficult property-secured loans. What lessons have Assetz Capital learned to date?
As well as learning from experience as part of the routine portfolio management activity we do have a formal ‘lessons learned’ process. This is built into our loan review forum which takes place once a week and is attended by a number of Department Heads and Board members. Loans which hit certain criteria are presented by Credit and Portfolio Management colleagues to the panel and one of the categories included in the presentation is ‘lessons learned’. The findings are then advised to the relevant teams and where appropriate we will also change our processes or guidance accordingly.
An example of this relates to development loan terms. Some time ago we were finding an emerging theme whereby some loans were coming under pressure to repay within the agreed term due to developers having over ambitious build or sales periods in their plans. Once this trend was noticed we cascaded a message to the teams to pay closer attention to the adequacy of development loan terms, to ensure that cautious sales periods were factored into the overall loan terms and reinforced this during the early stages of our loan approval process.
It’s not really appropriate to publish shortcomings that we find, but lenders should have confidence that we endeavour to advise them on a loan by loan basis and take action to remediate where we can.
Q: Could you explain the importance of the loan trading status "Monitoring"? Sometimes the updates give a concrete reason (e.g. failure to provide required documents, unlovely loan conduct, etc.), but sometimes it seems to be merely because forbearance has been granted - though in the latter case, there are also loans with forbearance but not monitoring. It's difficult to know what inference to draw, particularly from a CSV-downloaded loan book where text of updates is not available.
The “Monitoring” status posted on the loan dashboard page is to inform Lenders that the loan is being monitored more closely due to technical breaches of the loan terms which are generally capable of being remedied by the Borrower. If a more serious breach occurs which may or may not be capable of being remedied, we may mark the loan status as “Credit Event” and suspend it from trading. Lenders should refer to our Lender updates for further information on the status of a loan. As regards forbearance during the Covid-19 pandemic, many of the loans that have forbearance and are marked “Monitoring” are commercial mortgages because the borrower does not make the normal monthly payments during the forbearance. Conversely, there are property development loans which are not marked “Monitoring” but were given forbearance as a precaution, typically by extending the loan term within which to complete the development and repay the loan capital.
Q: How can I get a report of monthly or weekly interest % by product on a regular basis?
Whilst this report isn’t currently available in your dashboard, it is something that we are considering, and we hope to make more information of this nature available to investors in the future. We appreciate that people would like to see the performance of their overall investment, individual accounts, ISA versus non-ISA investments etc. We are working to cater for many of these requirements received from different investors.
- October 15, 2020