The Assetz Capital Provision Fund

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Assetz Capital Provision Fund

Assetz Provision Funding Limited (APFL), a UK Limited Company, has been set up to provide a discretionary Provision Fund linked to specific, identified Investment Accounts or loans. Each Provision Fund provides a coverage multiple of the expected future losses on the account, as specified in the terms for each Account. We explain our expected loss coverage multiple in more detail on our Defaults and Losses web page however it is simply the number of times over that expected losses on loans held within an Investment Account are covered by the Provision Fund for that Investment Account. So for example if expected losses in stressed conditions on a loan portfolio within an Investment Account such as the Quick Access Account were say 0.5% and the Provision Fund held assets that represented 1.5% of the loan portfolio in that account then we would quote a current expected loss coverage multiple of 3x. This means that the losses could in fact be three times higher than predicted and still be fully covered by the Provision Fund.

The Provision Fund is designed to cover;

  • Payment delays of interest from a borrower where that sum arrives later than expected
  • Shortfalls in interest received from a borrower
  • Any possible capital losses if a loan defaults and the security when sold does not cover the loan balance remaining

Investment Accounts Benefiting From The Provision Fund

*Interest is quoted gross and is capped at the quoted rate although actual returns could be lower. Interest target rates should be considered along with the relevant investment account expected defaults and losses.

How the Provision Fund is funded

Principally

  • Cash held within the fund provided by Assetz Capital
  • A part of the interest rate coupon paid by the borrower
  • Part of any loan arrangement fees received by Assetz Capital

Other Possible Sources

  • Cash or other asset security contractually pledged by third parties
  • The benefit of credit insurance

The balance and blend of the funding may vary over time at the discretion of the Directors of APFL.

Payments from the Provision Fund to lenders are discretionary. The directors of APFL will determine whether payment should be made on a case-by-case basis depending on the circumstances. At least some of the Directors of APFL are common with Assetz SME Capital Limited. Any payments of capital or interest to a Lender to cover any losses reflecting issues on particular loans requires that if that capital or interest is later collected from those specific loans in recoveries or otherwise then that value will accrue for the benefit of APFL to partly or fully repay its Provision Fund payment to the affected lenders. In the event of there being loan defaults within the Account that are in excess of the balance of the Provision Fund then there may be insufficient funds to cover all claims made by lenders.

It is the intention that, subject to funds being available, APFL would pay out under all reasonable circumstances where there is a genuine credit loss or missed / delayed payment towards any Assetz Investment Account investor for an account covered by the provision fund.

At all times, cash or equivalents (as defined above) will be held within APFL that are less than or equal to the target expected loss coverage multiple of Provision Fund cover specified for each individual Investment Account that receives benefit of a Provision Fund. The actual expected loss coverage multiple will be regularly published per Investment Account. Any excess cash or other assets held above this level may be drawn to Assetz SME Capital Limited from time to time and will not be repaid to APFL.