RATESETTER is rejigging its investment products, to boost liquidity and give the peer-to-peer lender more control over market rates.
The three new products, which will be available on 3 October, will be called Access, Plus and Max. Access will offer three per cent interest and no fees to access money; Plus will offer four per cent interest and cost 30 days’ interest to access money; and Max will offer a five per cent interest rate, with a fee of 90 days’ interest to access money.
RateSetter investments are currently spread across three markets – rolling, one and five year – which means supply and demand is set at a market level. Under the revamped product range, liquidity will now be based on RateSetter’s entire loan portfolio, rather than the liquidity of one particular market.
“RateSetter has always made its investment products low risk thanks to its provision fund model which means every investor’s risk is spread across the whole loan portfolio,” the firm said on Tuesday.
“RateSetter is now applying the same collective investment effect to make its products even more liquid. This will be achieved by basing all three products off one pool of money, as opposed to three distinct pools currently. This means investors will be invested in a pool of assets that in time will be billions of pounds deep, making it highly liquid.”
Another difference will be the way the rate of return is calculated. The current products have a going rate based on a trailing average but the new products will have a market rate which is provided by RateSetter.
“This is for two reasons: firstly, it will mean market rates that are more predictable and secondly because it gives RateSetter the control to ensure the rates do not become uncompetitive for the low risk lending we target,” RateSetter said in a blog post on its website. “Any change to the going rate will be notified in advance in the monthly statement.”
The firm confirmed that investors will still be able to set their own rate in order to try to outperform the going rate or undercut it to lend more quickly.
RateSetter also said that the new products will automatically reinvest until the customer chooses to withdraw their funds.
“This makes the products simpler and ensures that your investment is always earning, provided it is matched to loan contracts,” the firm said. “Importantly, it also provides consistency of liquidity for all investors because access to your money is always provided by the entire portfolio instead of individual loans with different repayment profiles.”
There will be no change to the existing one-year and five-year products, but the rolling product will be renamed Access and moved to the going rate.
“P2P is becoming a third asset class, between cash and shares,” said Mario Lupori (pictured), chief investments officer at RateSetter.
“Some P2P models have disappointed but RateSetter is delivering. Our new products will strengthen our position as the lowest risk and most liquid P2P investment.”