News Briefing - Crowdfunding, SME And Alternative Finance

Abstract representation of the stock exchange: bulls, bears and numbers on screens

1.UK – P2P

P2P Finance News reports early indications of how the IFISA season has gone:

“PEER-TO-PEER lenders have reported a rise in Innovative Finance ISA (IFISA) inflows this ISA season, although there are concerns that bad press in the lead-up to the end of the tax year dampened investor demand.

Industry figures have suggested that the collapse of mini-bond provider London Capital & Finance and a Financial Conduct Authority warning on “high risk” IFISAs could have made consumers wary about investing in the crucial days leading up to 5 April.

One industry source told Peer2Peer Finance News that his platform had seen muted growth in IFISA inflows at the tail-end of ISA season, which he attributed to the bad publicity surrounding the sector.

Adrian Lowcock, head of personal investing at Willis Owen, pointed out that the last few days before the end of the tax year are vital for ISA inflows.

2. UK – P2P

More on the chequered history of P2P as an asset class in investment trusts. 

Key fact, not mentioned in the article: the current share price is 72.4 pence (mid). Down from launch over four years ago - 100p. 

“VICTORY Park Capital Specialty Lending (VPC) reported its highest net asset value (NAV) return in six months, thanks to the improved performance of its balance sheet investments.

The alternative finance-focused investment trust reported a net revenue return of 0.73 per cent in March 2019, up from 0.46 per cent in February.

“During the month, the company continued to see positive revenue and capital returns as the balance sheet investments continue to perform,” VPC said.

VPC has been winding down its underperforming peer-to-peer lending portfolio since late 2016, after losses triggered substantial writedowns. Instead, it has moved more of its capital into balance sheet investments, arguing they typically offer higher returns with less leverage, while the lending platform takes on more risk as it usually takes first loss on loans.

The trust hit the headlines at the end of April when it emerged that fund manager Neil Woodford had divested his entire stake in the trust. He has been under pressure to offload liquid assets to make up for underperformance in his flagship fund.”

3. UK – AltFi

The Mail reports a story with a weak connection to the  Surge / London Capital sacandal. In brief, somebody already involved in the scandal also ran a business with somebody not involved. The story carries no picture of a barrel, nor yet its bottom… There may well be more interesting storiesto emerge about LCF, but we don't think this is not one of them.

This Is Money:

“The marketing boss at the centre of the London Capital & Finance savings scandal once owned a business with beleaguered entrepreneur Luke Johnson.

Paul Careless and Johnson were shareholders in an advice firm called Legalcare, which went bust in 2015 following a string of complaints about its behaviour.

Careless is under fire after his companies raked in huge fees by selling toxic bonds on behalf of collapsed savings firm LCF, which went bust in January owing £237million to 11,500 people. LCF is being probed by fraud investigators.

Company records show that Careless took control of Legalcare in 2012, with Johnson taking a 10 per cent stake the following year.” 

Johnson was not a director and did not play any executive role in the company. The business sold a subscription service where customers had access to a solicitor on demand over the internet."

Beleaguered entrepreneur Luke Johnson linked to London Capital & Finance toxic bonds tycoon | This is Money

4. US – FinTech

 

Crowdund Insider runs a long, useful report on the current state of US crypto regulation.

 

“Between coins, tokens, stamps, tickets, vouchers, and chips, which of these qualifies as a “security” under U.S. Securities laws? It’s actually a trick question, they all do!

Well, technically speaking, they all could potentially qualify as securities. The answer actually lies in evaluating the details of how the respective asset is created, marketed and sold to purchasers. Recently the SEC has released some substantive guidance on how to actually analyze those details which deserves a deeper analysis.”


5. US – FinTech

Moves at Blackrock in next-generation trading. Business Insider reports hires.

 

6. US – FinTech

Cryptocurrency comment from a Nobel Laureate.

“Columbia University Economics Professor Joseph Stiglitz, a long time financial transparency advocate who won the Nobel Prize for Economics in 2001 says cryptocurrencies function poorly as currencies, push economic activity underground and, for these reasons, should be “shut down.

Stiglitz made the comments in an interview at CNBC.

Stiglitz began by laying out an argument for how comprehensive data from an electronic money network would aid in regulating the economy:

“I’ve been a great advocate of moving to an electronic payments mechanism. There are lots of efficiencies. I think we can actually have a better-regulated economy. If we had all the data in real time knowing what people are spending, it would enable the Federal Reserve to actually set interest rates in a much more efficient way. We would have…better macroeconomic management.”

Cryptocurrency adoption, says Stiglitz, moves the economy in the opposite direction:

“It also would curb some of the illicit economic activities and it disturbed me a great deal the attention that was given to cryptocurrencies cuz those were moving things off of a transparent platform onto a dark platform.”

Money-laundering is already a problem, said Stiglitz, with massive wealth already sitting in “dark havens”:

“We know about the role of real estate and money laundering. We know from the Panama Papers the extent of this laundering. We know from research in recent years, for instance the work of Gabriel Zucman, the large percentage of global wealth that is held in these dark havens.”

Stiglitz defended the American dollar and the Federal Reserve, both of which are often attacked by cryptocurrency advocates for alleged mismanagement:

“We have a very good currency. So far, the currency has been run in a very stable. There is no need for anybody to go to a cryptocurrency.”

He also said cryptocurrencies do not function well as currencies. Others have made similar claims based on the argument that cryptocurrency networks’ hard-wired supply protocols mean issuance can not be adjusted in order to respond to real-world circumstances:

“In our standard courses in economics, we talk about the attributes of a good currency and the US dollar has all those attributes. Cryptocurrencies do not have those attributes.”

Rather than moving underground, Stiglitz advised that concerned parties work to address how to prevent transparent money from becoming surveillance money:

“If we want a more efficient economy, without these illicit activities, I think we are going to have to move to more of an electronic payments mechanism we are going to have to figure out to have the transparency of the electronic payments mechanism without the dangers of the surveillance and the surveillance state.

Stiglitz ended his comments unequivocally:

“I actually think we should shut down the cryptocurrencies.”

 

According to Encyclopedia Britannica, Joseph Stiglitz won the Nobel Prize for Economics in 2001 for his work, “…laying the foundations for the theory of markets with asymmetric information.”

Stiglitz’s work has been applied to improve accuracy in insurance markets:

“Stiglitz’s research concentrated on what could be done by ill-informed individuals and operators to improve their position in a market with asymmetric information. He found that they could extract information indirectly through screening and self-selection. This point was illustrated through his study of the insurance market, in which (uninformed) insurance companies lacked information on the individual risk situation of their (informed) customers. The analysis showed that by offering incentives to policyholders to disclose information, insurance companies were able to divide them into different risk classes.The use of a screening process enabled companies to issue a choice of policy contracts in which lower premiums could be exchanged for higher deductibles.”

7. International – P2P

Crowdfund Insider reports on the (apparently) acceptable face of P2P in China.

“Peer to peer lender Fincera has issued their 2018 year-end results. The Chinese online lender reported top line revenue for the year ended December 31, 2018 at RMB 1,412.0 million (USD $205.7 million), an increase of RMB 388.1 million from RMB 1,023.9 million in the prior year period.

Net income jumped to RMB 274.8 million (USD$ 40.0 million) for the year, or RMB 5.45 per diluted share (USD $0.79 per diluted share), compared to a net loss of RMB 8.4 million, or RMB 0.18 per diluted share in the prior-year.

Along with the vastly improved results, Fincera declared a USD $0.30 dividend. Fincera said it plans to issue a dividend semi-annually going forward.

Fincera is a provider of internet finance for both small businesses and individuals.

Fincera has paid special dividends in the past but this marks the first time that Fincera plans to pay a dividend twice per year going forward.”