AltFi Data (quite explicitly sister company to AltFi) has unveiled the second iteration of its online lending focused analytics platform. In addition to new metrics and tweaked methodologies, the firm has also on-boarded its fifth UK-based originator.
The performance of secured P2P lender Assetz Capital may now be scrutinised by users of the platform, alongside that of Funding Circle,RateSetter,Zopa and MarketInvoice in the UK. US lender Prosper Marketplace and French platform Lendix are also on the tool.
Assetz now provides AltFi Data with loan-by-loan, cashflow level data, covering its full track record. Users of the analytics platform – mostly institutional investors – can drill into that track record in highly granular fashion, but most importantly in a fashion that allows for comparison with other platforms on the tool.
AltFi Data applies its own definitions to the cashflow data, and thus claims to have created a standard within the nascent business of online lending.
“Assetz should be commended for pushing the boundaries of transparency by facilitating verified disclosure to a common standard,” explained Rupert Taylor (pictured), CEO of AltFi Data. “Investors, including big institutions, recognise that this sector is originating assets with high expected returns and low expected correlation. But investors have established protocols regarding valuation, risk management and due diligence. Standardised metrics allow these assets to fit within these protocols and will encourage adoption of the asset class.”
In addition to on-boarding Assetz,AltFi Data has also unveiled new metrics, including, most notably, a risk adjusted return metric and loss coverage ratio. By comparing the gross yield of its loan portfolios with the associated loss rate, the company is able to convey how many times losses would have to multiply before capital would be lost.
In a somewhat concerning sign, loss coverage in the UK industry is currently at its lowest point in history, for the first time dropping beneath 2.0x, to 1.75x. For taking that level of risk, investors are currently being rewarded with net returns of 4.9 per cent. But Taylor points out that 4.9 per cent nonetheless represents "a huge premium" compared with traditional asset classes.
Newcomer Assetz is in fact outperforming the index by a significant margin. Its net returns currently exceed 10 per cent, with a loss coverage ratio of over 8.0x.
“At Assetz, we recognise that full loan book disclosure underlines our commitment to originate high quality loans,” said Stuart Law, founder and CEO of Assetz. “We are comfortable being held accountable for the quality of our origination. This transparent disclosure can also greatly assist investor processes such as due diligence, valuation and risk management. Equally importantly, it reminds the lenders on our platform that our economic destiny is inextricably linked to the performance of the assets that we originate.”
AltFi Data’s methodology has also been tweaked such that, in calculating returns, it now uses monthly cohorting, rather than quarterly. But perhaps more importantly, defaulted loans are now written down to the expected level of recovery (based on each platform’s historic recovery levels), rather than being written down to zero. An industry standard recovery rate is used for platforms that do not have enough track record to justify the calculation of a historic recovery rate.
Further developments for AltFi Data include adding several new originators, including Rebuildingsociety in the UK, Crealsa in Spain and “a leading US platform”.
