I read therefore I write
P2P
Investors in a fix as car firm director “disappears “
“
Crowdfunding investors are likely on the hook for roughly $600,000 in loads to
parallel importer named TLC Cars that failed to deliver on sold vehicles – and the director is now uncontactable . “ write the paper.
P2P (peer-to-peer
) investment platform and Crowdfunding seems to get popular in Singapore with
many platforms being established recently, like “ Capital Match, MoolahSense,
Funding Societies, New Union, coasset.com etc “
These platforms may offer a rate of return of up to 15-25% per investment/loan, but
of course, this comes with high RISK as well. P2P lending is relatively new investing tools here in Singapore, investors need to do their own due diligence prior investing in such " alternative investment ", also think carefully if such investment vehicle is suitable for your risk profile.
image credit to The Business Times.com.sg |
P2P Lending : Concept Explained by Wikipedia
Peer-to-peer lending, sometimes abbreviated P2P
lending is the practice of lending money to
individuals or businesses through online services that match lenders directly
with borrowers. Since the peer-to-peer lending companies offering these
services operate entirely online, they can run with lower overhead and
provide the service more cheaply than traditional financial institutions.
As a result, lenders often earn higher returns compared to savings and investment products
offered by banks, while borrowers can borrow money at lower interest rates,
even after the P2P lending company has taken a fee for providing the
match-making platform and credit
checking the borrower.
Also known as crowdlending, many peer-to-peer loans are unsecured personal
loans, though some of the largest amounts are lent to businesses. Secured loans
are sometimes offered by using luxury assets such as jewellery, watches, vintage
cars, fine art, buildings, aircraft and other business assets as collateral.
They are made to an individual, company or charity. Other forms of peer-to-peer
lending include student loans, commercial and real estate loans, payday loans,
as well as secured business loans, leasing, and factoring.
The interest
rates can be set by lenders who compete
for the lowest rate on the reverse
auction model or fixed by the intermediary company on the basis of an analysis of the borrower's credit. The
lender's investment in the loan is not normally protected by any government
guarantee. On some services, lenders mitigate the risk of bad debt by
choosing which borrowers to lend to and mitigate total risk by diversifying
their investments among different borrowers.
Peer-to-peer lending does not fit cleanly into any of the
three traditional types of financial institutions—deposit takers, investors,
insurers—and is sometimes categorized as an alternative financial service.
P2P Leading also facing the problem of “ Information Asymmetry “
Below
is a very good write up on this topic from The Economist :
Asymmetric information problem
Definition
of asymmetric information: This is a situation where there is imperfect knowledge. In
particular, it occurs where one party has different information to another. A
good example is when selling a car, the owner is likely to have full knowledge
about its service history and likelihood to break down. The potential buyer, by
contrast, will be in the dark and he may not be able to trust the car salesman.
Asymmetric information in financial markets
Asymmetric
information is a problem in financial markets such as borrowing and lending. In
these markets, the borrower has much better information about his financial
state than the lender. The lender has difficulty knowing whether it is likely
the borrower will default.
To some extent, the lender will try to overcome this
by looking at past credit history and evidence of salary. However, this only
gives limited information. The consequence is that lenders will charge higher
rates to compensate for the risk. If there was perfect information, banks
wouldn’t need to charge this risk premium.
What is the 'Lemons Problem'
The
lemons problem refers to issues that arise due to asymmetric information
possessed by the buyer and the seller of an investment or product, regarding
its value. The lemons problem was put forward in a 1970 research paper,
"The Market for Lemons," written by George Akerlof, an economist and professor at the University of
California, Berkeley.
The tag phrase identifying the problem came from the original example of used cars that Akerlof used to illustrate the concept of asymmetric information, as defective
used cars are commonly referred to as "lemons."
The lemons
problem is recognized as existing in the marketplace for both consumer and
business products, and also in the arena of investing, related to the disparity
in the perceived value of investment between buyers and sellers. The lemons
problem is also prevalent in financial sector areas, including insurance and
credit markets. For example, in the realm of corporate
finance, a lender has asymmetrical and less-than-ideal information regarding
the actual creditworthiness of a borrower.
Link for further reading: MAS simplifies regulations for securities-based crowdfunding platforms
How about
you, do you have any P2P loan in your portfolio ? and do you happen to have "lemons " in your loan portfolio?
“ What’s New in Pension Portfolios: SEX Shops”
image credit to The Business Times.com.sg |
The second piece of news is
interesting: ” Three years ago, Amsterdam’s mayor asked a roomful of
pension fund managers if they would be willing to invest in the regeneration of
his city’s notorious red-light district. Two lonely hands went up. The same question today might have triggered a bidding war.”
In the current world
of low-interest rate, any asset that could generate good/decent return will be highly
sought after by most of the fund manager.
What do you
think about Singapore ? will this happen that Reit manager buying an asset at our
Red light district ( Geylang areas ) and package it as a Red Light REIT, this will be the
first to be listed in Singapore and the yield may be high and consistent due to its “inelasticity of demand “ regardless of economic cycles for such activities
from an economic point of view.
Cheers!
Quote Of The Day :
"Most of
what we know about sales comes from a world of information asymmetry, where for
a very long time sellers had more information than buyers. That meant sellers
could hoodwink buyers, especially if buyers did not have a lot of choices or a
way to talk back."
Daniel H. Pink , Author of the best-selling book “ Drive” and “To SELL is Human”.
Daniel H. Pink , Author of the best-selling book “ Drive” and “To SELL is Human”.
STE, I really look forward to your posts.
ReplyDeleteRed Light REIT! LOL!
I can't imagine it in the Asian context, I don't think our society is liberal enough for that.
I have read a bit about such crowdfunding sites, the touted returns, if it's really 15-25% is very impressive. That certainly warrants going to take a 2nd look at this sector.
Hi TTI,
ReplyDeleteYah! You are right, our society may not ready for that kind of REIT. .. :)
Yup ..P2P investment may be suitable for those high risk profile investors. ..but not for me at this moment. .hahaha.
Cheers.👍
STE : At first I thought you want to share some cool books that you've just read lol But after reading the whole article, still like your sharing on your thought.
ReplyDeleteLike TTI, like your idea of RED Light REITS (as I am into REITS myself) lol
Hi Richard,
DeleteYah ! I would like to have such REIT in my portfolio as well ! I guess it will have stable DPU ,,,as their business will not be affected by economic cycles ,,, :-)
Cheers !👍👍
Hi STE,
ReplyDeleteHaha, but why would the red light reit manager want to ipo their biz? Get more cash to acquire more 'assets' and have product variation? LOL
Hi LP,
DeleteYah ! I think their would like to keep this private as business is good and stable ,, you are right,, they may use their cash to venture into JB and Batam like " PCK limited "
Cheers ! :-)
We would be happy to fund and invest with you in any profitable project if you have any viable project we can finance by making mutual investment with you. If you are interested, kindly contact us on:contact@doverstockloans.com for more details.
ReplyDeleteStock Loan Services Australia
Hi Georgia Aguilar ,
DeleteThanks for the suggestion , as I'm now only managing my own portfolio and not investing for others ,,,
Cheers !