rstats

As a quick update to last weeks post this week we will be using the estimates of bad debt from last week to assess the true risk/rewards of loans at various lengths from the funding circle (FC) loan book. I realised recently that when picking loans my default criteria tends towards picking loans with the lowest percieved risk (i.e lowest risk band) with the highest interest rates possible. This strategy has some interesting consequences in that it preferentially selects long term loans that tend to have higher rates.

We are again looking at the peer to peer (P2P) loan book for funding circle (FC), with the focus being the variation in return based on portfolio composition and diversification. FC states that the average return on investment is 6.6%, with 93% of investors that invested in more than 100 companies, with a maximum exposure of 1% earning 5% or more. The original purpose of this blog was to look at various portfolio’s and estimate the risk that they carry for the investor.

This is the first in a series of blog posts looking at P2P lenders, which will be aimed at surfacing more details about the structures of their loan books. I hope to expand this series by looking at optimal strategies, predictive modelling, and interactive data science. Since 2005, with the launch of Zopa P2P companies have provided a middle path between cash holdings, and investing in stocks and shares. Funding circle, which was launched in 2010, has currently facilitated over £1 Billion in loans to British businesses.