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It's not a "past performance isn't indicative of future performance" scenario in any reasonable sense. The loans you buy are already sold and it's fixed rate. Y

It's not a "past performance isn't indicative of future performance" scenario in any reasonable sense. The loans you buy are already sold and it's fixed rate. You are calling the risk of the whole company defaulting "performance" and that's what I disagree with. Their highest rated loans (11-13%) are guaranteed by them; that's quite explicit. The end-borrower default-rate is pretty low which is why they can do it.

JumpCrisscross 9y ago
> The loans you buy are already sold and it's fixed rate Let's say you buy 100 $100 loans at 7%. You expect to earn back your $10,000 of principal plus $700 of interest. If 10% of your bonds default, you get back $9,000 of principal and $630 of interest. That's a 4% loss on principal. TWINO advertises it will buy back defaulting loans at face value; if they pay out, you earn $10,700 irrespectively. (I'll ignore that their Terms of Use appear to explicitly refute this guarantee [1].) But what if they don't pay? Do they have cash on hand to pay if 10% of loans issued through their platform default? What about 50%? (This happened in the financial crisis. People thought they had "no risk about performance" because someone guaranteed their bets.) This is why understanding the background default rate, whether the credit quality of new borrowers is worse than old borrowers, and TWINO's cash position are important. If the whole company defaults and borrowers default enough, you will underperform (a) expectations, (b) a risk-free security like a U.S. Treasury and (c) even straight cash. TL; DR TWINO is risky. Why do you think they're selling the loans to you, instead of banks or hedge funds or sophisticated investors? > You are calling the risk of the whole company defaulting "performance" and that's what I disagree with See the above. If the company defaults your guarantor vanishes. Now you're directly exposed to the credit of your borrowers. (You'll also have to enforce your claims under Latvian law. Be ready to find and pay a Latvian lawyer.) [1] https://www.twino.eu/ws/public/user-agreement-stream?lang=en https://www.twino.eu/ws/public/user-agreement-stream?lang=en
- akvadrako 9y ago
  You are really making this too complicated. Nobody is looking at going after individual borrowers for a few hundred euro - you don't know anything about them except their country and rating. The risk is not about "performance" but the company being fraudulent or defaulting, in which can you lose everything.

JumpCrisscross 9y ago

> The loans you buy are already sold and it's fixed rate Let's say you buy 100 $100 loans at 7%. You expect to earn back your $10,000 of principal plus $700 of interest. If 10% of your bonds default, you get back $9,000 of principal and $630 of interest. That's a 4% loss on principal. TWINO advertises it will buy back defaulting loans at face value; if they pay out, you earn $10,700 irrespectively. (I'll ignore that their Terms of Use appear to explicitly refute this guarantee [1].) But what if they don't pay? Do they have cash on hand to pay if 10% of loans issued through their platform default? What about 50%? (This happened in the financial crisis. People thought they had "no risk about performance" because someone guaranteed their bets.) This is why understanding the background default rate, whether the credit quality of new borrowers is worse than old borrowers, and TWINO's cash position are important. If the whole company defaults and borrowers default enough, you will underperform (a) expectations, (b) a risk-free security like a U.S. Treasury and (c) even straight cash. TL; DR TWINO is risky. Why do you think they're selling the loans to you, instead of banks or hedge funds or sophisticated investors? > You are calling the risk of the whole company defaulting "performance" and that's what I disagree with See the above. If the company defaults your guarantor vanishes. Now you're directly exposed to the credit of your borrowers. (You'll also have to enforce your claims under Latvian law. Be ready to find and pay a Latvian lawyer.) [1] https://www.twino.eu/ws/public/user-agreement-stream?lang=en https://www.twino.eu/ws/public/user-agreement-stream?lang=en

akvadrako 9y ago
You are really making this too complicated. Nobody is looking at going after individual borrowers for a few hundred euro - you don't know anything about them except their country and rating. The risk is not about "performance" but the company being fraudulent or defaulting, in which can you lose everything.