Welcome to June’s Secondary Market statistics blog post. Recently, we talked about the most common methods used to purchase current, overdue and defaulted loans and whether these transactions were made at a premium, discounted or par value.
Below, we are going to do the same based on the transactions made in May.
In May 2018, the total amount of investments purchased through the Secondary Market totaled €1,010,929.37, an increase of approximately 20% (+€165,372.07) since April. Whilst the order of the most popular methods for making the purchases did not change, the total share and distribution saw significant variances compared to previous months.
In May, the amount of manual investments made increased by over 53% since April and the share of the total increased to 41%. In comparison, the amount of investments purchased via the API on the Secondary Market decreased by 23% and the total share for the month decreased to 17.2%. Along with the increases in the amount of investments made manually and via the API, Portfolio Manager saw an increase of 21% and held approximately 42% of the total share.
In line with previous months, Portfolio Manager still leads the way in purchasing current loans at a par value. On the other hand, manual investors were the most successful at purchasing current loans at a discounted value. In addition to this, manual investors purchased €123,189.33 of current loans at a premium, compared to €49,335.57 via the API.
Whilst there is essentially no priority given to the Portfolio Manager for any loans, it is fast and is still the most popular investment method among all of Bondora’s customers. As a reminder, no priority is given to any investment method (including Portfolio Manager) and is not biased based on an investor’s portfolio size.
In May, we saw an increase of 56% in the total amount of overdue loans purchased through the Secondary Market. The majority of these transactions were completed manually and at a discount.
Overall, the total amount of defaulted loans purchased through the Secondary Market increased by 27% in May. The most notable change here is the volume of the amount purchased manually and at a discount, in March this figure stood at €23,066.09, in April €81,198.45 and in May €94,135.92.
In comparison, only €101.21 of defaulted loans were purchased at a premium. A unique strategy used by a small number of investors is to purchase defaulted loans with a significant discount with the plan to reap the rewards once the collection and recovery process begins to generate a cash flow.
Good to know
Selling your loans can result in a loss of the original principal, as the secondary market typically does not provide a high enough premium for current loans to compensate for the non-performing part of the portfolio. Therefore, we advise to proceed with caution and not to try and sell everything at once if you see a percentage of your portfolio in default. It is likely that you will quickly sell the performing part of your portfolio and be left with the loans in recovery, significantly damaging your expected return.
The speed of the sales process depends on the market demand. In general, current loans are more liquid and will usually be sold within a day if sold at par value or a slight premium. Delinquent loans may take more time or the sale can be unsuccessful. As soon as another investor has purchased your loan, you will receive the funds directly to your Bondora account.
If you’re still unsure how to sell your loans, you should always get in touch on [email protected] and have a chat with one of our experienced Investor Relations Associates who will walk you through it step by step.