Bondster: A potential star market?
The Bondster P2B platform allows investors to invest in loans to legal entities that are secured by a lien on immovable or movable property. Yield ranges from 5% to 15% per year.
FONDSHOP.CZ I 21. SEPTEMBER 2017
In June of this year, the new Bondster P2B platform has been launched on the Czech market, which allows investors to invest in loans to legal entities that are secured by mortgages on immovable or movable property. In addition, Bondster offers or wants to offer many relatively exceptional and interesting features such as autoinvest, liquidity, redemption guarantee in case of default of the debtor for a certain period of time and the secondary market in the future.
So Bondster undoubtedly deserves your attention and that is why we look at this platform in detail (whether you want an investment market). Just for reminding - about the possibility of "investing in loans" we wrote, for example, already in FS 10/2016, where we looked, among other things, at some of the available P2P platforms in the Czech Republic. But they always shared that it was a natural person's (investor's) loan to a physical person (e.g. from a so popular "caravan" advertisement). But the Bondster investment market is working on the P2B principle, as we have already said, you can invest in corporate loans. At least, the Bondster investment market is interesting from the point of view of the Czech Republic, although it is not the only platform of its kind available in the Czech Republic.
WHAT'S GOING ON?
The Bondster investment market is operated by Bondster Marketplace, which is a regulated entity in the payment system. Interestingly, the very name "Bondster" is based on the English term bond, a Czech bond. This is because the bonds provide investors with a regular and predetermined return, and the goal of the Bondster investment market, as stated by its representatives, is "to enable investors to obtain the same benefits under even more attractive conditions without the need for complex administration and the need for a high volume of funding." However, now to the facts. Everything is actually very simple.
As generally the P2P or P2B platforms do not work, we will not be able to explain it anyway, and every one of our readers certainly knows or can read that article from last year. Well, then. Once you sign up for the platform and meet all the necessary formalities (you agree to the investor agreement, fill in your personal details and agree to the terms of business, ie everything goes online), you will be offered a single loan offer. Apart from the fact that you can leave all loans out, you can of course use different filters to let you see just those that meet any of your specific requirements. At the time of writing this text, 22 different loans were offered, mostly from ACEMA, or from BEZ BANKY. Of course, the question is whether the offer from one or two non-banking institutions is sufficient. In the long run, the answer would be no, but it should be remembered that Bondster is only shortly on the market for just a few months. ACEMA was selected as the first partner because it is one of the most important providers of non-bank loans in the market. It was followed by BEZ BANKY. It may seem familiar to you, among other things because we have written about the RENDIT investment fund it is part of. Already, according to the Bondster owners, it is in talks with other lenders, and we can expect that we will soon see the expansion of the offer. After all, the company has little goals. It wants to expand into Europe and at the beginning of next year it would like to have around 7000 investors and roughly a quarter billion in the amount invested.
WHAT IS THE OFFER?
We have already mentioned that at the time of writing, 22 different loans / investment options are available, with their annual return ranging from 4.9% p.a. up to 15% p.a. The duration of the investment then moves from 5 months (which is currently an exception) to a long 210 months. The potential return offered is therefore quite high and, of course, we can not know what loans will be on offer for 2-3 years, it can be expected that the Bondster investment market still offers the opportunity to invest in attractive yield loans because it is just one from the essence of the platform.
Currently, most mortgage loans form, although other business loans are obviously available. In common, they are always secured, typically real estate, which you can thoroughly study before investing yourself. The platform is quite accommodating, and all the information is easy to find, although sometimes it may be brief.
Regarding the length of the investment, everybody at first glance feels that the average time of the investment is long (which is also related to the type of loans), so the question is whether the investor can get out of the investment before the maturity date.
WHAT IF I WANT TO SELL INVESTMENT EARLIER?
Foreign platforms operating in a similar way, the problem of early exit from the investment is generally addressed by the so-called secondary market. It means, you can sell your investment to another interested investor, usually for a standardized fee, around 1% to 2%. Bondster currently does not offer the secondary market but plans it for the future. In addition, without it, it is already possible to get out of the investment earlier. Bondster offers the possibility of "regular exit from the investment". The whole thing works in practice quite simply, though the explanation is a little more complicated. At the moment, you select a loan, you see, among other things, the box "performance". This includes percentage and some descriptions, such as "yearly", "quarterly". It's a percentage that means how much you can get out of your investment, and that term then indicates when you can step out, respectively. in which periods. For example, if you say 1% / year, then this means that the performance fee is one percent, and that you can get off at the earliest in a given date when you open a "five-day window" and then again once a year. So if you, for example, invest in a loan from which it is possible to get out "annually" and your investment would be say 1.9.2017, then you can prematurely quit 1.9.2018 to 5.9.2018, then 1.9.2019 to 5.9. 2019 and so on. So you are guaranteed that you can get out of the investment before its maturity, but you are limited at that time. It is true that currently all ACEMA loans are offered at least annually (some or quarterly) at a fee of 1%. Loans from BEZ BANKY even offer a "Liquidity Guarantee", it means you can withdraw from them at any time, but for 2% from invested amount.
However, the parameters mentioned above are not dogmatic, they are at the discretion of the company and can change over time. Generally, however, without the existence of a secondary market there is the possibility of performing, it is only good to watch how often and for how much. The advantage over the secondary market is that you do not have to wait if your investment is going to buy at all, which may be a problem in the small market.
If, however, the Bondster investment market is going to start the future market as planned, and preserves the possibility of a regular performance, it could be an ideal combination.
PROFIT AND RISKS
As we have already mentioned, the Bondster investment market currently offers to invest a loan with an annual yield of between 5% and 15%, with most loans ranging from 8.5% p.a. up to 11.5% p.a. This is not a small one, and it really is an attractive value compared to competitors, whether P2P platforms or foreign P2B platforms, which are available to us as well. However, with such an interesting yield, the question of the riskiness of such an investment is, of course, immediately forthcoming. First of all, just as elsewhere, the risk-return ratio applies, and it is worthwhile to count on. However. Loans as such are secured and thus, in the case of default by the borrower, there is real collateral, which should, for the most part, cover the investor's investment. Bondster officials also say that they only choose partners as partners (ie companies like ACEMA, etc.) who have deep experience and knowledge, have a long-standing market presence and are able to properly check their debtors and, if necessary, successfully recover their claims.
For selected loans, a redemption guarantee is also offered, although it should be noted that at the time this text was created, this service was only available for a small amount of the offered loans. For clarification, the redemption guarantee means that the loan provider guarantees the recovery of the principal and interest due in the event that the client is in default for repayment for a certain period of time. Thanks to these measures, LTV may be only 20% for some loans, although it generally ranges somewhere between 40% and 60%, which is still a good value. It is also true, as we have already indicated, that each loan shows how a PDF with a valuation report is secured and often available. All this is good to study before the investment itself, as well as to the companies that offer the loan, namely ACEMA and BEZ BANKY.
WHAT’S ELSE GOOD TO KNOW
The minimum investment in loans starts at a very low 5 EUR and the maximum limit of the total investment is not limited. Funding policy is also essential. This is set in such a way that the investor does not pay any fees in the first three months, but after this time, he pays 1% per annum from the invested amount. This is not much in terms of the yields offered, and it is also a competitive fee structure for foreign platforms. They may even be cheaper, but they are often just "zero introductory charges" that can change over time.
When we mentioned this foreign competition, let us note that the Bondster investment market currently offers or plans to offer the relatively advanced functionality most of them have in foreign platforms, and that can only be welcomed. We mean, for example, the autoinvest function or the secondary market already under discussion. The advantage for the Czech investor is, of course, that all loans are, logically, in the Czech crown, so there is no currency risk, unlike the situation where the investor would use one of the foreign competition platforms. Some of them are available in the Czech language, but there is very little investment in CZK.
The Bondster investment market is well placed to become very interesting for investors. Currently, the only problem with the relatively small loan offer is from two non-bank companies (de facto one). Sometimes, due to the relatively long maturity of loans, somebody may also be prejudiced by the temporary absence of the secondary market. Although it is replaced by the "regular exit" function, it does not have to meet any of the restrictions, but it has undeniable advantages over the secondary market. You do not have to wait, for example, to see if anyone wants to buy you anyway. In addition, the problems outlined above could disappear in the coming months as, as we have said, Bondster is planning to include new non-bank companies into the offer as well as to establish a secondary market.
Overall, the Bondster investment market can be a very interesting way of expanding your portfolio with other, traditional assets that are unrecovered with an interesting return. Thanks to the low minimum investment, the problem is not to invest regularly or just try it out.
FONDSHOP.CZ I 21. SEPTEMBER 2017