DIY Investor Magazine
/
2015 Issue
22
What else might you need to know about marketplace
loans and their place within your portfolio? The answer
is tax efficiency. You can put these investments in your
SIPP and from April next year within a new breed of
ISA, the IF (Innovative Finance) ISA.
Nice Yields, What’s the downside?
The downside is that while you might be tempted to
compare P2P loans with savings accounts, they’re not
savings accounts and as such carry more risk to your
money and are not covered by the Financial Services
Compensation Scheme. This having been said, some
platforms run provision funds to cover potential
investor losses.
Whilst on the subject of default risk, let’s take a second
look at Zopa, established in 2005.
2005? That was before the credit crisis, I hear you say,
how did it affect them?
Well, Mat Gazeley from the company tells me that
‘Zopa was largely unaffected by the credit crisis due to
our conservative underwriting approach. There was a
small increase in defaults but nothing alarming when
compared to our expected losses.’
He continues, ‘The crisis actually helped Zopa gain
more lenders and borrowers as we were able to tell
a positive story around responsible lending as more
people looked for non-bank alternatives.’
If there’s one thing to take away from this article it’s
this, as an Investor, you need to decide how much risk
you want to take to get the growth and or yield that
you want to achieve.
In future articles, I hope to dive into the fine detail
further and help you familiarize yourselves further
with these two important new asset classes and
the platforms giving you access to individuals and
companies looking to raise money without using a
bank.
Adam Braggs is Managing Director of Crowdnetic Ltd
If there’s one thing to take away from this
article it’s this, as an Investor, you need to
decide how much risk you want to take to
get the growth and or yield that you want
to achieve.
