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When Will Assetz Capital Lenders Get Their Money Back?
I looked at the most recent data provided to us by Assetz Capital to estimate when lenders in its Quick Access Account, 30-Day Account and 90-Day Account might expect to get their money back.
I also interviewed Simon Atkinson, Head of Capital Markets at Assetz Capital, to get a little more information about the state of play during this wind-down phase.
When will Assetz Capital lenders get their money back?
The specific loans you hold mean that you could be very lucky and be repaid quickly or you might have most of your money stuck in Assetz for years. However, here's how the average lender might do…
I looked at data on the outstanding loans, as well as the possible future development tranches that need to be funded on those loans, and also did my best to account for outstanding bad debt in recoveries, which is a little trickier to do.
Taking all that into consideration, I estimate that a bit less than one-third of the money remaining in the auto-lend accounts will be paid back during 2023.
Currently, it looks like a similar figure, possibly slightly more, will be repaid in 2024.
In 2025, perhaps 15% of the outstanding amounts will be repaid, but 2026 appears likely to pay back little to lenders under current schedules.
About 20% will be repaid in 2027. Some bad debts will hang on beyond that, but otherwise lenders should have seen most of their funds repaid by this point.
Might Assetz Capital speed this up for the sake of the small investor?
Simon gave responses on this which I repeat for you below, but I believe that Assetz Capital will see some incentive in trying to find ways to close off this chapter of its history more quickly, now that the end has begun.
My view is that they will want to reduce the use of resources on legacy products and the distraction it causes. They will probably want to help small investors if they can, and they will also want to do the best they can for their overall reputation, even though they won't be selling to small investors any more.
My questions to Simon Atkinson, Head of Capital Markets at Assetz Capital
For the rest of this page until the horizontal gold bar, all headings and big bold text are my questions to Simon. His answers are in speech marks. Any comments of my own are outside of speech marks.
Are you using your provision fund to fund further development drawdowns?
“No. To the extent where we have facilities [with yet] to fund drawdowns, they're covered by cash within the access accounts. So we're using funds from the investors where possible. We use the money lent or cash in the access accounts: a rolling cash balance from what was new investment and loan redemptions.
“The provision fund is separate to that. That’s built up from setting aside interest from loans.”
How much money do you expect that retail investors will need to re-lend to fund future tranches?
“We haven’t disclosed a figure, but it’s a very minor proportion of the overall pool within those accounts. So it’s not a significant amount.
“It should be covered in a relatively short period, as these are development finance loans that it relates to. Those with drawdowns [generally] have 12-18 month terms, so won’t have much life left in them. Drawdown is typically the first nine months or so. Exposure will be finished off relatively soon.”
Based on the latest data received by 4thWay from Assetz Capital, I estimate perhaps 10% of the lent amount outstanding will be re-lent to fund further development tranches. I also built that estimate into my calculations in the section “When will Assetz Capital lenders get their money back?” near the top of this page.
How much, if any, are institutional investors going to fund the future tranches of those existing loans?
A couple of retail investors have expressed disappointment to 4thWay that you’re not doing more for them. They appear to understand the risks in peer-to-peer lending, and accept them, but, as one put it, she feels that she’s being penalised because Assetz Capital has changed its strategy. These investors are comparing it unfavourably to how other platforms have closed in the past. Do you think it’s possible to meet them halfway? Or have you got any plans to shift even more of the existing lending and future tranches to institutions, so that retail investors can get their money back faster?
“There is theoretically that pool of loans funded by retail accounts, which could be taken on by someone else and we will keep an eye to. I’m not sure how realistic it is though.
“One of the drivers for the decision to [put on] hold the retail lending is that, for the access accounts, the rates we offered became uncompetitive [compared] to what investors are able to achieve through bank deposit accounts, and it’s the same if you’re [an institution] looking at purchasing a pool of loans in the current market. The rates possibly won’t seem that attractive.”
Are you – or is your chief risk officer – currently forecasting that the access accounts will all return a profit to investors?
“Yes, they will carry on in the normal way and interest will be received. We’ll monitor and manage those loans.
There’s expected to be some uplift in the fees for managing that pool, but that won’t impact the returns to the extent they go from positive to negative.”
Excluding fees during wind-down, do you expect that investors will get a lower rate than the target rates as those accounts wind down, due to bad debts? Has your chief risk officer suggested any rough estimates of how much less investors will get?
“No lower returns as a result of bad debts. Performance shouldn’t be affected. There will be a change in the mix of loans. With the reduced amount of lending, a smaller proportion of development loans that have higher yields will [remain to] pay out.”
One more thing about the provision funds: are they going to work differently now that investors are simply getting their money back as borrowers repay?
“No change. The loan pool will need to redeem over time.”
All the best
Big changes at a company inevitably create some anguish and, in some places, job losses. I want to wish staff at Assetz Capital who find their positions closing all the best. I hope you find a new job that you're happy with very soon.
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