Funding Circle is a Peer Lending platform that allows investors to lend to small businesses in the UK.
I've invested around £8K into Funding Circle over the last decade - I like the idea of supporting small business, I like the idea that my money is lent out to over 300 businesses and so it's well diversified to protect from the risk of default.
Hell, i don't even mind that they've temporarily frozen the selling of loan parts because of covid-19, I think that's actually in investors' interests to give businesses more chance of staying afloat.
My return for the first few years was pretty good - around 8% after bad debts, and given that they lend out at around 7%, that's acceptable - not the best of returns compared to crypto or stocks, but I like the ethics, so I was happy enough with that.
However, the return dipped to 5% a couple of years back, not so good, but not too much of a dip from 7%, and I was still happy enough to keep my money in there, nice and diversified.
Deceived by an 'average annualised return' rate
When I log on to my 'overview' I see this...
In reality the performance of Funding Circle from 2016 to 2019 (yes, all pre-covid!) has actually been pretty dire....
All because of an increasing default rate....
And the 5% APR I've been seeing is the average return rate, not the the latest APR.
Had I noticed those low 1-3% figures from the past couple of years I probably would have pulled my money out sooner.
Lessons learnt
Don't rely on headline statistics or funky displays to tell you the truth and at least read the yearly reports.
I'm not going to beat myself up too much about this, it's still better than having the money in the bank, my long term return is still OK, and this money was always earmarked for cashing out NOW anyway.
I think the reason I didn't check back in 2017/2018 is that I was so damn busy trying to escape work that I just didn't check properly - however, the fact that I didn't check in late 2018, that's inexcusable.
I'd also paused any new lending for some periods to let cash to accumulate for my land purchase.
Note to self, check your returns on EVERYTHING at least every 6 months!
Better returns now?
The stats above show returns back up to 6% for 2020 - I'm not sure I can trust those figures.
Maybe they'd got on top of the defaulters before covid-19 hit, and maybe their current freeze on loan-selling is helping businesses stay afloat, so maybe the return really is 6%, but I just can't believe it.
It's a bit moot, because I'm cashing everything out anyway, I'm just having to do it slowly because I can't sell the money I've got left in there!