Welcome to November’s Secondary Market statistics blog post. Last month, we talked about the most common methods used to purchase current, overdue and defaulted loans and whether these transactions were made at a premium, discount or par value.
Below, we are going to do the same based on the statistics received in November.
Current loans
| API | Manual | Portfolio Manager | Total | |
| Discount | €11,571 | €4596 | €3,556 | €19,723 |
|---|---|---|---|---|
| Par | €93,509 | €73,931 | €503,192 | €670,632 |
| Premium | €42,525 | €147,601 | €0 | €190,126 |
| Total | €147,605 | €226,129 | €506,748 | €880,481 |
Similarly to October, the Portfolio Manager is the reigning king when it comes to purchasing current loans on the Secondary Market. The total amount of Secondary Market purchases have increased by over 7% since the previous month, we can also see that the API has overtaken the manual investing option in purchasing current loans at par value.
You will notice that the Portfolio Manager has not invested in any loans with a premium. As a reminder, the Portfolio Manager only purchases loans that are current and priced at either a discount or par value.
Overdue loans
| API | Manual | Portfolio Manager | Total | |
| Discount | €2,336 | €15,494 | €0 | €17,830 |
|---|---|---|---|---|
| Par | €747 | €9,796 | €0 | €10,543 |
| Premium | €392 | €1,826 | €0 | €2,218 |
| Total | €3,475 | €27,116 | €0 | €30,591 |
When looking at overdue loans, the manual selection option is certainly the most popular. The table above shows nearly 8 times as many investments were completed manually compared to the API, suggesting that investors without the technical skills are still able to identify loans based on their own unique selection criteria. This trend is the same as October.
Defaulted loans
| API | Manual | Portfolio Manager | Total | |
| Discount | €1,297 | €34,442 | €0 | €35,739 |
|---|---|---|---|---|
| Par | €3 | €13,426 | €0 | €13,429 |
| Premium | €0 | €1,061 | €0 | €1,061 |
| Total | €1,300 | €48,929 | €0 | €50,229 |
Compared to October, the number of defaulted investments bought manually with a premium has increased by over ten-fold. A unique strategy used by some 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.
Bringing it all together
| API | Manual | Portfolio Manager | Total | |
| Total Secondary Market Purchases |
€152,379 | €302,175 | €506,748 | €961,302 |
|---|
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 investor@bondora.com and have a chat with one of our experienced Investor Relations Associates who will walk you through it step by step.
