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Happy 1st birthday Plus!

As of 30 November 2020, the Safeguard Fund was wound down with the remaining balance paid to investors. Investors affected have received email communications about the payment and how this impacts them.

A year to the month after we launched Plus, our higher return and higher risk investment offering, investors have lent out more than £100 million. That’s nearly 9,000 people investing on average £12,000.

Plus offers higher returns than our other products because it is not covered by Safeguard, and includes 2 additional risk markets: D and E . These markets were initially tested with institutional investors, and we used that trial to assess viability for our individual investors. Combined with data we had on our loan book’s performance in 2008 and immediately after, we were confident Plus could be a valuable offering for our investors.

How has Plus performed to date?

Our dedicated team of risk analysts are some of the best in the business: to date, as a portfolio, Plus is performing in line with expectations. Individual investors will have different individual experiences, however, 73% of investors invested for an average of at least 6 months, with no loan sales, have achieved actual returns of at least 6% to date. We continue to optimize our matching algorithms to minimise the differences in lender experience.

We’re really pleased with how our investors have adopted Plus and grasped that it’s a mid- long-term investment: less than 2% of all Plus investors have partially sold their loans, choosing instead to keep their money earning and thereby increasing their return over time.

Plus’ inner workings

The 4-month highs…

In the first 4 months of investing through Plus, your returns are very high. This is because we don’t count a loan as in default until there are 4 months’ worth of missed repayments. As we factor expected defaults into your projected return, at this stage loans are performing at and above expectation.

…and the temporary turbulence

Even though we thoroughly scrutinise everyone who applies for a loan with us, defaults can and do happen. We do everything we can to help borrowers in trouble get back on track with payments, but it’s not always possible. For Plus investors, this becomes evident after 4 months, as defaults have an impact on your returns.

This is, generally speaking, when investors may start to see defaults. If you were to sell all your loans at this stage, you’d only see half the story. Once the poorly performing loans default, they’re removed from your loan book and your healthy loans offset the losses.

The chart below illustrates how some people will have higher returns earlier and lower returns later, and vice versa. Overall, the average is converging towards the target return.

Plus returns settles towards target over time

Time is one of the biggest influences on your loan book’s performance

Defaults are a normal and expected part of peer-to-peer investing. It’s easy for us to say: but we know it’s difficult in the face of a sudden change in returns and the emergence of defaults not to have a knee-jerk reaction and withdraw your money. Expected defaults form part of your projected return.

In other words: your return typically recovers in the following months as repayments from loans performing to expectations are continually paid.

What’s next for Plus?

We’re pleased with how Plus has performed to date but we’re not stopping here. We have a lot of exciting improvements coming up, including better default reporting and monthly performance projections. Many of the improvements we make are based on your feedback: so if you have any comments, please get in touch!