Assetz Capital Review
Note in 2021: there's a queue for new P2P lending, which reopened recently after Assetz Capital finished government-backed pandemic loans.
4thWay's Assetz Capital Review
Outstanding lending results on unique property and secured business loans, with lots of manual and auto-lend options from just £1
Assetz Capital Review: their highest-paying auto-lending account
Assetz Capital's 90-Day Access Account received an Exceptional 3/3 4thWay PLUS Rating
This account targets a payout of 4.18% after bad debts.
Its manual lending account appears likely to pay even more interest after bad debts at about 6.02%. 4thWay also rates that account as 3/3. Spread across lots of loans manually to contain the risks.
What does Assetz Capital do?
Assetz Capital* does the widest variety of loan types of any P2P lending or IFISA provider in the UK. All loans are secured against real property.
It does short-term bridging loans, development loans and loans secured against property for small businesses to improve their results. It also does residential buy-to-let mortgages, as well as mortgages against commercial properties. The latter means loans to the owners of office, hotel or pub buildings that are being let out.
When did Assetz Capital start?
Assetz Capital is one of the oldest and largest P2P lending companies. It started in April 2013 and lenders have lent £1.4 billion (approx £1 billion when excluding non-P2P, pandemic lending).
What interesting or unique points does it have?
Assetz Capital's reach is large. It has representatives across the country that enable it to find a lot of borrowers to shortlist for a possible loan. It now has one of the biggest teams in the industry, with a wide variety of experience.
Assetz Capital is one of few P2P lending companies that could already reach profitability in a typical year. It can do this as soon as it decides to stop growing and cut its costs.
Over all its years, bad debts have been outweighed by lending interest earned by 20 to 1. Reserve funds have protected most lenders even from those losses.
Assetz Capital* usually has a lot of loans, making it relatively easy to spread your money across lots of loans yourself. It also offers auto-lend accounts with reserve funds. Here, Assetz spreads your money and the risks across all loans in the account. This is a very strong risk-reduction feature.
Assetz Capital review: how good are its loans?
Assetz Capital's loans are the kind that often get issues, but are backed up by a lot of property with a proven track record. Many of the loans fall late and need to be chased by Assetz Capital, sometimes through the courts. However, you continue to earn interest on the late loans and the vast majority of troublesome loans have repaid in full – one way or the other.
Although tens of millions of pounds-worth of loans suffered trouble at some point, losses to date are hitting just £7 million, which compares to over £180 million earned in interest to lenders.
Across all loans, the average loan size compared to the property value is just slightly over 60%, which is good. The maximum amount that borrowers can borrow is usually 75%, which is a perfectly acceptable upper limit. That limit is even a little overstated, because Assetz Capital calculates it particularly conservatively on many bridging loans.
Many Assetz Capital loans will often repay later than planned, but, again, interest is earned while you wait.
Assetz Capital* approves some junior loans, which are higher risk, but these loans are rare, at under 5% of all loans, and Assetz has become more cautious of approving them over time. Assetz Capital charges these borrowers higher interest rates and they can normally borrow no more than 70% of the loan amount.
Continuing the theme of loan quality, borrowers can have some lesser issues on their credit records, although no bankruptcies.
Assetz Capital often secures its loans on other business equipment and possessions for extra protection.
More on Assetz Capital's mortgages
Assetz Capital's mortgages to commercial or residential landlords (buy-to-let loans) have a different profile, being considerably less likely to fall late or turn bad.
For those mortgages, Assetz Capital typically requires that the rent is 1.25 times the monthly loan payments, which is an acceptable level of cover.
Even so, these are not the primest mortgages to residential-and-commercial-property landlords. That's why interest rates are around three percentage points above the top rates on the loan market. This uplift in rates is completely sufficient to cover the slightly higher risks of losses in these loans. It also makes up for the higher number of delays these loans can experience.
The amount that landlords are allowed to borrow compared to their property valuations is also lower to nullify the additional risk.
More on development lending
Development lending rates and borrower fees are sensible. The maximum that borrowers can borrow is usually 75% of the hoped-for sale price of the property. This is a reasonable maximum and in line with the wider development lending industry.
Assetz Capital during COVID-19
Many businesses were allowed to access government-backed loans during the pandemic. Such loans were far cheaper and with more generous terms than normal loans. Naturally, these businesses took those types of loans where they could, rather than property loans. So, rather than do next to no lending at all during this time, Assetz Capital switched to offering the pandemic loans. Unfortunately, Assetz wasn't allowed to offer them to ordinary lenders as P2P loans.
It has since restarted new P2P lending. Although it's reached a modest amount compared to before the pandemic, it's been growing this summer, as Assetz Capital works through its pipeline of loans. We'll update the Assetz Capital Review as and when more news on lending volumes comes in.
A detailed analysis of the substantial data provided to us by Assetz Capital on a regular basis shows that its results on existing loans during the pandemic have been highly satisfactory. Actual losses on a minority of loans will continue to be small.
How much experience do Assetz Capital's key people have?
It now has a team with a vast amount of experience between it, covering all of the areas of credit risk, property loan originations, business lending and property experience necessary to handle and choose between the large number of loan applications that it receives.
Assetz Capital review: lending processes
Assetz Capital's primary focus has always been on the quality of the property used for security and the likelihood that lenders will be able to get their money back in full. The more security that the borrower offers, the lower their rates are. A detailed analysis of Assetz Capital's loan book shows that it has historically priced loans well for the risks.
Assetz Capital* gets all the basics right in terms of largely eliminating the risk of fraud from borrowers and taking proper care of the legal aspects of arranging the loans and taking the security.
It also takes personal guarantees from the borrowers, which is standard. We at 4thWay usually ignore this, because it's not easy for us to establish how useful the guarantees are at any given P2P lending company.
Assetz first reviews information about the borrower and security from a distance. It's good to see that they also meet most borrowers, and it's best practice that they meet them after more objectively assessing the broad loan details. Assetz also usually visits the property that will be your loan security for itself. As you would hope and expect, it obtains an independent valuation of the properties.
Ex-pats and foreign nationals can borrow, but most importantly all security is located in the UK. In my experience, when the security is overseas, even in other developed countries, the risks can be substantially higher, so this is good to see.
Assetz Capital doesn't have hard and fast rules about its borrowers and the properties they have. Borrowers could sometimes be first-time developers if they have an experienced project manager and they could also be first-time landlords. If Assetz Capital had no record, these somewhat looser criteria should make us pause. However, with its long successful record, it clearly does a great job of assessing these loan applications appropriately.
Assetz Capital tries to understand the borrower and I'm satisfied that it really looks to establish the purpose of the loan, whether it can track that and whether the amount requested is sufficient – or whether it will it leave a large debt and nothing for the borrower to show for it.
It also wants to know if the borrower can meet any monthly payments with room to spare, and importantly it considers whether the intended means of repaying the loan in full are realistic.
I'm very pleased to see that Assetz Capital usually takes on the full funding of a development project at the start, rather than try to raise the money in tranches. This is not standard in P2P development lending, but it removes the risk that lenders will decide not to fund later tranches, destroying the success of development projects.
I'm satisfied that Assetz has the specialist knowledge to assess the development is a sensible project for the location and to estimate when a sale and repayment is likely to happen.
Importantly for the kinds of loans that Assetz does, late and bad-debt recovery processes have functioned well and at appropriate speed, starting to whir as soon as a borrower is eight days late for a payment. This is necessary to ensure that lenders are likely to get their money back in full.
How good are Assetz Capital's interest rates, bad debts and margin of safety?
With Assetz Capital's manual lending account, the expected interest earned if lending today after bad debts is around 6.02%. This is clearly sufficient to cover the risks, especially with its excellent record in recovering bad debts.
A detailed, bank-style stress-test assessment of all its loans shows that even a great recession and large property-market crash shouldn't lead to losses for lenders who have spread their risks across lots of loans.
Assetz Capital* has some auto-lend accounts that pay several percentage points lower interest, albeit with reserve funds. The best of these is its 90-day lending account, which pays the highest rates at 4.18%, but with the same types of loans – and therefore the same underlying risks – as the other auto-lend accounts.
I see no good reason why lenders should be choosing one of the two shorter-term lending accounts, the shortest of which is the Quick Access Account paying 3.82% (3.75% if you don't re-lend repayments).
The natural investment horizon for money lending is from the time you lend until the time the borrowers repay the money and interest. You can't expect to always be able to fight nature, so if you really need instant access, lending is not appropriate. At least, not with a large part of your money.
That said, there is currently almost no difference in interest rates between these accounts. Also, the lowest-paying auto-lend account still provides sufficient cover, due to automatically spreading you across lots of loans – a major risk-reduction feature – and its reserve fund and interest combined.
The risk of suffering a loss in any of these accounts, even in a severe recession and property crash similar to 2008, is low.
Assetz Capital's reserve funds
As the months (and years) go by, we manage to acquire more information on how Assetz Capital's reserve funds work. We are still short a few minor details we ideally want, but we have enough to be confident that its Quick Access, 30-Day and 90-Day lending accounts are well protected against losses.
The latest data received by 4thWay this July, with yet more additional information provided by Assetz, shows that reserve funds will likely cover all – or at least most – losses, even during the huge recession caused by the pandemic. Any interest earned by lenders should easily be sufficient to cover any difference.
Has Assetz Capital provided enough information to assess the risks?
Assetz Capital* provides a vast amount of data and allows us a lot of access. In a few minor areas we'd like a touch more information, but it still remains one of the most transparent P2P lending companies for us and we are easily able to assess the risks properly.
The public get a lot of information on its website, but I think its website should be easier to navigate and it should include more information about how it assesses borrowers. Assetz Capital should also provide more details to the public about its key people.
Signed in lenders get sufficient information about individual loans.
Is Assetz Capital profitable?
Assetz Capital has not yet reached stable profitability, but it could do so if it wanted to.
It had profits of about £1 million a few years ago. In 2019 and 2020, Assetz Capital made losses of less than £1 million on income of £16 million.
As soon as it decides to stop growing and cut costs related to its growth effort, it will become profitable in most years. It's therefore one of the most mature businesses in the industry at this stage.
What can you tell me about Assetz Capital's cybersecurity?
Sucuri, our security provider, has done a soft probe of Assetz Capital's website, which performs very well compared to other P2P lending companies.
The Assetz Capital website doesn't appear to have malware and Sucuri marks it as clean. Google Sage Browsing, McAfee, PhishTank, Opera and Yandex also mark it as clean. The website is secure and carries a valid security certificate, helping to protect you when you supply your personal data. It automatically directs you to a secure version of its site.
Its website technology is up-to-date.
It uses Amazon Web Services security measures, including the AWS firewall. Furthermore, an independent auditor reviews its infrastructure security every year.
Assetz Capital has internal monitoring of its website and other systems, and also uses Mimecast to monitor for external threats.
Is Assetz Capital safe and a good investment?
The 4thWay team has found Assetz Capital to be a good investment since we first had the opportunity to do a very detailed analysis and meet the team back in January 2017.
This is the first time that I have been charged with updating the Assetz Capital Review in three years. Since then, my opinion of Assetz Capital* has only improved, as the 4thWay team has eked out even more details from its key people, and its record has matured even further.
Its performance during the pandemic has also been highly satisfactory.
What is Assetz Capital's minimum lending amount and how many loans can I lend in?
The minimum lending amount is just £1.
Most of the time there are a lot of loans to choose from. Now, there's currently a dip in the number of loans you could lend in due to Assetz Capital re-opening P2P lending.
Manual lenders can usually diversify into plenty of loans within a few months. Those using auto-lend accounts can strongly expect they will automatically have enough diversification.
Does Assetz Capital have an IFISA?
All Assetz Capital's lending accounts are available in an IFISA. As usual in P2P lending, this comes at no additional cost.
Can I sell Assetz Capital loans to exit early?
Yes, you can sell your loans to other lenders. In the Quick Access Account, you might even be able to sell back to Assetz Capital. It's usually free to exit your loans early by selling them, if you don't want to wait for borrowers to repay.
However, during non-normal market conditions, Assetz Capital charges 1% per year (0.083% per month) on amounts that lenders are withdrawing. Those trying to sell now should probably expect this cost. After all, we've just been going through a pandemic with abnormal market conditions.
You can sell your loans at a discount to speed up the process if your need for cash is particularly great, but you shouldn't normally do this.
What more do I need to know?
New P2P lending will be around £10 million in June and July as Assetz Capital restarts P2P lending. This is still a long way from peak lending volumes. But lending is growing rapidly and will return to normal in the coming weeks.
Assetz Capital is still processing a last minute surge in pandemic loans that came in before the final deadline.
It says that as a result: “the Access Accounts are now over-funded temporarily and currently do not have the capacity for new investment. This was very common in the early days of the Access Accounts and is the case again for now as we restart lending. Therefore, it is now necessary for the accounts to operate a temporary queuing system for new investment, as well as to taking steps to reduce the uninvested cash balance.”
You might therefore look to get started by buying loans in the Manual Lending Account.
Finally, another reminder that you should expect many of Assetz Capital's loans to take longer to repay than initially planned. If you don't like that, lend less or don't lend at all.
Thank you for reading the Assetz Capital Review! Visit Assetz Capital*.
Assetz Capital review: key details of its Manual Lending Account
4thWay PLUS Rating
Interest rate after bad debt
Here we show the P2P lending site's own estimate
4thWay Risk Score
Lower Risk Scores are better. How is this different to the 4thWay PLUS Rating?
Assetz Capital Quick Expert Review: outstanding lending results on unique property and secured business loans, with lots of manual and auto-lend options from just £1
Assetz Capital does the widest variety of loan types of any P2P lending or IFISA provider in the UK…Read the full review here
Independent opinion: 4thWay will help you to identify your options and narrow down your choices. We suggest what you could do, but we won't tell you what to do or where to lend; the decision is yours. We are responsible for the accuracy and quality of the information we provide, but not for any decision you make based on it. The material is for general information and education purposes only.
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The 4thWay® PLUS Ratings are calculations developed by professional risk modellers (someone who models risks for the banks), experienced investors and a debt specialist from one of the major consultancy firms. They measure the interest you earn against the risk of suffering losses from borrowers being unable to repay their loans in scenarios up to a serious recession and a major property crash. The ratings assume you spread your money across hundreds or thousands of loans, and continue lending until all your loans are repaid. They assume you lend across 6-12 rated P2P lending accounts or IFISAs, and measure your overall performance across all of them, not against individual performances.
The 4thWay PLUS Ratings are calculated using objective criteria that can be measured and improved on over time, although no rating system is perfect. Read more about the 4thWay® PLUS Ratings.
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