Farringdon Portfolio Risk Management

Farringdon Portfolio offers advice on selecting an appropriate portfolio of Relendex loan parts. We then arrange for Relendex to manage them in line with your instructions or we can support you in managing them yourself.

Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.

What are the key risks?

You could lose the money you invest.

Many peer-to-peer (P2P) loans are made to borrowers who can’t borrow money from traditional lenders such as banks. These borrowers have a higher risk of not paying you back.-Advertised rates of return aren’t guaranteed. If a borrower doesn’t pay you back as agreed, you could earn less money than expected. A higher advertised rate of return means a higher risk of losing your money. These investments can be held in an Innovative Finance ISA (IFISA). An IFISA does not reduce the risk of the investment or protect you from losses, so you can still lose all your money. It only means that any potential gains from your investment will be tax-free.

You are unlikely to get your money back quickly.

Some P2P loans last for several years. You should be prepared to wait for your money to be returned even if the borrower repays on time. Some platforms may give you the opportunity to sell your investment early through a ‘secondary market’, but there is no guarantee you will be able to find someone willing to buy. Even if your agreement is advertised as affording early access to your money, you will only get your money early if someone else wants to buy your loan(s). If no one wants to buy, it could take longer to get your money back.

Don’t put all your eggs in one basket.

Putting all your money into a single business or type of investment, for example, is risky. Spreading your money across different investments makes you less dependent on anyone to do well. A good rule of thumb is not to invest more than 10% of your money in high-risk investments.

The P2P platform could fail.

If the platform fails, it may be impossible for you to collect money on your loan. It could take years to get your money back, or you may not get it back at all. Even if the platform has plans in place to prevent this, it may not work in a disorderly failure.

You are unlikely to be protected if something goes wrong.

The Financial Services Compensation Scheme (FSCS), in relation to claims against failed regulated firms, does not cover investments in P2P loans. You may be able to claim if you received regulated advice to invest in P2P, and the adviser has since failed. Try the FSCS investment protection checker here. Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA-regulated platform, FOS may be able to consider it. Learn more about FOS protection here. If you are interested in learning more about how to protect yourself, visit the FCA’s website here. For further information about peer-to-peer lending (loan-based crowdfunding), visit the FCA’s website here.

Farringdon Portfolio & Relendex

Relendex was established to connect lenders with professionally vetted, creditworthy borrowers and provides competitive interest rates to both who can offer good security. The business model combines a robust and scalable lending platform with conservative hard underwriting. Relendex do not lend against retail or office accommodation and focuses mostly on Residential, New build, and Refurbishment loans as well as some mixed-use developments.

Relendex Limited is Authorised and Regulated by the Financial Conduct Authority (FRN: 723117).

Farringdon Portfolio offers an advising and arranging service that utilised the Relendex alternative lending platform. You as the lender have direct loan agreements with the borrowers, alongside other lenders participating in the Relendex loan. Because of your direct contractual relationship with borrowers, your investments are segregated from the financial position of either Relendex or Farringdon Portfolio.
In investing, there are no guarantees.

The possibility of losing money is always there, even if it’s sometimes remote. If there was no risk, the interest rates you earned would be no higher than savings account rates.

Relendex assesses and manages the underlying loans. Farringdon Portfolio works with you to advise, based on your risk profile, the right P2P portfolio for you. We then arrange for Relendex to manage your loan parts within your P2P portfolio based on your instruction.

The Farringdon Portfolio service means you are not involved in assessing loans. Your money is automatically split between multiple loans within your portfolio. This is an excellent defence against losing money on any single loan.

In alternative lending, you need to declare taxes yourself, Farringdon Portfolio will provide you with a tax statement which is provided by Relendex.

What are the key risks?

No investment is guaranteed, and the Financial Services Compensation Scheme (FSCS) never covers investment losses. This applies in alternative lending just as it does in other types of investments. In return, you have a greater chance of growing your pot of money faster than prices rise than you would with savings accounts. One of the key risks in alternative lending generally is that borrowers fail to repay. Yes, Relendex can take the property from the borrowers and sell it to recover bad debts, but you are not guaranteed to get every penny back.

Interest Rates & Security

The interest rates on the underlying Relendex loans are fixed. If a loan goes into default you may earn more interest if default interest rates are applied. If a loan defaults and Relendex fails to make a full recovery of the debt, you may lose capital and interest.

Farringdon Portfolio invests in loans from the Relendex platform (secured property lending). Relendex will seek to recover any default debt by selling the borrower’s property.

The recovery rates on Relendex’s loans have to date been strong, and this is in part because the value of the property on which the loan is secured is always significantly higher than the loan advance (average LTV is below 60%). Further statistics on the performance of the Relendex portfolio are available here.

Farringdon Portfolio or Relendex have no Contingency Fund to pay you back if a borrower is unable to do so. However, you have the confidence of property security, combined with your money being automatically spread across multiple loans. With Relendex loans, these two elements combined are stronger defences against losses than a typical contingency fund.

Withdrawals

If you want to proceed with an early withdrawal, Farringdon Portfolio offers a facility for you to redeem your investment (in whole or in part), subject to a fee. Your holdings would be sold in the Relendex Resale Marketplace (RMP) Sales depend on liquidity in the marketplace from time to time. To date, the RMP has been very active and there is generally good demand for loan parts. If for any reason the loan parts could not be sold, you would have to wait until the relevant loans were repaid.

As usual in alternative lending, you can only get your money back before the Borrower repays if other lenders want to buy in. Relendex has a secondary marketplace with a good track record. But the fact is that you should not expect that it will always be easy to get your money out quickly. If there are delays in selling your loan part, you will still earn interest while you wait and with the same level of risk, and you will continue to receive Borrower repayments.

In The Event Of A Platform Wind Down

Alternative lending platforms in the UK are required to have pre-written, funded, wind-down plans in the event they shut down. For most platforms, it is not difficult to wind down an existing loan book and it is usually inexpensive to do so. Relendex, as the platform managing the loans, would manage the wind-down itself, according to its plan.

The Financial Conduct Authority insisted on clearer wind-down plans from December 2019 but does not manage wind-downs itself. For the most part, your returns during wind-down will continue to rely on the quality of the loans. This is the case whether the platform is winding down or not. Most alternative lending platforms wind down for business reasons, rather than poor-quality loans.