Assetz Capital was founded in 2012 and has since grown into the 2nd largest UK peer-to-peer business and property lending (P2P) platform with £324 million lent cumulatively, to-date. Investors on the platform lend money to SME’s, property developers and to fund renewable energy projects.
The vast majority of loans are secured by tangible assets and investors have the choice of five accounts which diversify funds across a large number of borrowers or have a further option of manually selecting individual projects to lend to. A provision fund aimed at covering any losses that cannot be recovered from the sale of assets also exists, however pay-out from this fund is at the discretion of the company directors.
Assetz Capital has provided their loan book1 data to Orca enabling analysis to be conducted. This is the first time a third party has published independent analysis on the Assetz Capital loan book, so we’re eager to gain any comments or feedback on this review. Feel free to contact Orca’s CEO, Iain Niblock ‘ia[email protected]’ directly with any comments.
Assetz Capital Review
Assetz Capital Investment Products
Distinguished by loan purpose and early access terms, investors have the choice of five accounts. A further option exists for lenders to select their own projects to lend to and investors can get started by lending a minimum of £1 – the lowest minimum of any UK P2P platform.
|Quick Access Account||30-Day Access Account||Property Secured Investment Account||Great British Business Account||Green Energy Income Account||Manual|
|Borrowers||British businesses with realisable security||British businesses with realisable security||Business loans secured on property||Business loans secured on property||Business loans secured on property||Asset security at your selection|
|Early Access||No fees. Very quick access to funds.||No fees. Access to funds after 30 days.||No fee (subject to investor demand)*||No fee (subject to investor demand)*||No fee (subject to investor demand)*||No fee (subject to investor demand)**|
|Bid time||Automatic||Automatic||Automatic||Automatic||Automatic||Manual loan selection|
* Investors can access their funds early providing there are new lenders available to substitute current commitments.
** It is possible to sell loans on the Assetz Capital secondary market, again this is subject to demand.
Unlike other major P2P platforms such as RateSetter, Funding Circle and Zopa, interest rates are quoted gross of defaults and the actual return is likely to be lower than advertised. Having recently been granted full authorisation by the FCA, the Assetz Capital ISA (Innovative Finance ISA) is expected Q4 2017 – investors can pre register now on the website. A General Investment Account (GIA) is currently offered.
Assetz Capital saw a 213% growth in 2016 lending compared to the previous year and this growth has continued in the first half of 2017. Investors on the platform are primarily direct retail investors, however, both Victory Park Ranger and P2P Global Investments have invested through the platform.
Source: Orca Analysis
Although early access is not guaranteed, growth in lending demonstrates that there is demand from new lenders which may indicate that investors are able to access their funds early, should they choose to.
The process of withdrawing funds from the Assetz Capital platform is described in the video below.
Credit: Assetz Capital, 2017
Assetz Capital Performance – Defaults & Bad Debt
Assetz Capital has five categories that define the status of loans.
- Repaying relates to loans that are operating as expected.
- Monitoring are loans that the company is monitoring due to an indication that the loan may move into default.
- Default is a technical breach of the loan contract, for example, a missed payment, failure to supply MI or a covenant breach.
- Recovery is assumed post default, after professionals have been appointed to recover the capital.
- Repaid loans are completed loans.
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The definition of default used by Assetz Capital differs to that of other major P2P providers. For example, the eight P2P platforms of the P2P Finance Association (P2PFA) assume a default to have occurred when a borrower misses three payments or more. For the purposes of this analysis, we have assumed that all loans in recovery can also be classified as defaulted.
As an investor, it’s important to remember that defaults may not result in actual capital loss as asset security underpins 97% of loans. If a loan has defaulted, Assetz Capital will attempt to sell the asset underwriting the loan. 2013 is the earliest year of reasonable data where we can see a substantial differential between the default rate and bad debt rate (includes recovered capital). In 2016 and 2017, the default rate and bad debt rate are equal, suggestive that the recovery process takes several years.
The default rate is as high as 16% in 2014 reducing to 2% in 2016. Loans originated in 2016 and 2017 are still in their infancy, with 88% and 97% respectively of loans still outstanding. In 2017, there has been one default, equating to £1.3 million.
The percentage of loans in the different categories can be viewed in the chart below. This represents how defaults and recoveries progress through the loan term. As a reference to this chart we’ve plotted a loan term breakdown of all 392 loans sanctioned by Assetz Capital.
The recovery performance can be seen in the chart below, with almost 70% of 2013 defaulted loans being fully recovered and approximately 20% being recovered in part.
The purpose of loans across the Assetz Capital loan book is fairly diverse, demonstrated by the pie chart below.
Assetz Capital has remained relatively consistent with their lending criteria shown by the minimum, maximum, and average loan amounts detailed in the table below.
|Minimum Loan Amount||Average Loan Amount||Maximum Loan Amount|
With the exception of 11 loans totaling £4.5 million which were secured with personal guarantees, all loans originated by Assetz Capital are secured by tangible assets.
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Omitting some outliers, the Loan to Value (LTV) is generally between 50% and 100%. A weighted average LTV of 63% has been calculated. It’s worth noting that all development finance loans – equating to 19% of the entire loan book – are secured on a loan to gross development value.
A separate company, Assetz Provision Funding Limited (APFL), has been established to provide coverage for losses at the discretion of the company directors. Borrower repayments and Assetz Capital themselves fund the provision fund. The amount of funds available in the Assetz Capital provision fund is a multiple of the expected losses in poor economic conditions. Taken directly from the Assetz Capital website, the coverage ratio for each account can be seen below.
Source: Assetz Capital Website
Assetz Capital Review Conclusion
Assetz Capital has reached a sufficient scale where the platform is financially stable and can offer investors access to their money early should they so choose. Asset security underpins the vast majority of loans and the team at Assetz Capital appears to have a clear recovery process, although it can sometimes take several years for capital to be recovered.
One downside of the Assetz Capital platform is the confusing number of accounts offered to investors, however, providing they persevere, a reasonable risk-adjusted return from a platform that is steadily building a strong track record is on offer.
Editor’s note: This is a refreshed version of a review conducted in August 2016, with updated loan book analysis and insights.
This review of Assetz Capital is based on analysis conducted on a loan book dated the 17th of May 2017 which accounted for £210 million of loans. At present, the platform has issued £324m loans cumulatively.