A year on from my last report and Funding Circle (a peer-to-peer lending website in the UK) is still going strong. It is approaching nearly £600 million in funded loans. Whenever I check there is usually 50 or more loans available. It has been sometime since I saw a loan fail to reach its funding minimum. The company has also expanded to property development loans, albeit at a fixed rate rather than the normal auction system (with first charge on the property).
So has the continued success of the company translated into improved returns for the customers/investors? You may remember two year ago my annual return (~2%) was barely better than a bank deposit – largely due to a rash of bankruptcies. Last year was better, the return was a respectable 4.1% as recoveries picked up significantly. This year the result is:
After Fees: 7.3%
After Bad Debt & Recoveries: 6.3%
I consider that a very good return. It is roughly equivalent to the return on the UK stock market (FTSE-100) over the same time period. The gross and after fees returns are roughly consistent with last year, and recoveries were down a little. The difference in return is down to bad debt more than halving.
Over all this time my investment system has not changed, no extra money has been invested (but all profits reinvested). I only bid on loans under 24 months, from profitable firms that are paying tax at the expected rate and have positive working capital. People have asked about the “paying tax filter” – these loans are to small companies unlikely to have access to the tax minimisation systems heard about in the press. Thus a company showing an accounting profit that is not paying roughly the expected tax on that profit (given various UK tax breaks – historical losses or research costs for example) should be a warning sign there may be something strange going on in the accounts. I don’t have the time to dig deeper into such firms – they are just cut at this stage.
So if I haven’t changed anything, why has bad debt dropped? I’m not sure. My bad debt rate is now about average compared to all investors. It could be better risk management by Funding Circle, or just a more favourable UK business environment. According to their statistics page, bad debt on Funding Circle loans made in the last couple of years has trended below expectations. However, bad debt in loans made during the first two years (2010-11), when I was an early adopter, have been much greater than expected. This explains why my annualised return since joining the site is 5.1% compared to the average of 5.7% for equivalent investors.
Decisions should be made on future benefits not historical costs. On that basis I’m considering adding a little extra money to the capital. There are a few concerning issues with the UK economy and I believe the possibility of returning to the “bad years” is non-trivial. However, if the return from Funding Circle is around 2% in the bad years, then it seems a reasonable risk to take. I hope.
A couple of numerically notable birthdays fell at the end of last year and at the beginning of this year. To celebrate we made short weekend trips to Langkawi (November 2014) and Bangkok (April 2015). Neither holiday was particularly energetic, our main goal was relaxation and eating. So I can’t say much about the tourist sites of eaither destination, but I can say they are nice places to hang out.
The best photos from the trip are in a short slideshow available here.
A previous post mentioned that I’ve started playing board games. So far my favourite 2-player board-game is the award winning Pandemic (the game teased in that previous post). This game plays incredibly well with anywhere from 2 to 4 people, and would probably still work even played solo. This is because in Pandemic players are not competing against each other. Instead everyone cooperates as a team against the board game itself.
The aim of Pandemic is prevent overwhelming waves of disease spreading across the globe, and victory is achieved by curing them. If there are too many disease outbreaks or time runs out, then the game is lost. The board is a map of major world cities with little coloured cubes to denote the prevalence of particular diseases. Players take on the role of various CDC employees, each with their own special abilities. Each turn there are various possible actions: move around the globe; treat disease in the current city; work towards a cure; and more. At the end of each turn players collect cards from the “player deck” which can be used to either speed movement or aid cure research. A card can be used for one or the other, but not both. This sets up a nice dilemma – use a card to travel quickly to a hot zone or save it towards a long-term cure. These cards can also be traded between players, but only if they are both in the appropriate city. This complicates teamwork, as being spread out helps contain disease quickly, but being close aids research through card trading. After the player cards comes the infection stage, when a few cities have the amount of disease in them increased. If there is too much disease in a city then an outbreak occurs, spreading to neighboring cities.
The brilliance of the game comes from its pacing. If the game was entirely as described above then players could formulate long-term plans towards cures, and then steadily move forwards with occasional diversions for threatening situations. Instead, there are epidemics and a resulting period of panic as everything seems to be going wrong. In the player deck are between 4 to 6 epidemic cards. The number of such cards determines the game’s difficulty. When an epidemic card is drawn a random new city is given the maximum amount of disease. Then that city’s infection card, and all the previously drawn infection cities and shuffled and placed back on the top of the infection deck. BACK ON THETOP! This means that all the previously infected cities will soon be infected again, and if they haven’t been treated then there is a good chance of an outbreak.
This great mechanic brings a little bit of stress to the game. Plans tend to fall apart once an epidemic occurs. Getting two such cards in quick succession mean the players will struggle for some time to get back to a state where they can plan cures. The way the rules suggest shuffling the cards prevents 3 epidemics in a row – because such an event would almost certainly mean the end of the game. Each game I’ve played so far has been a rollercoaster, the careful execution of plans punctuated by setbacks from epidemics. It is also very well balanced, my win rate has been around 50% (but getting better as I’m still learning), but I also haven’t tried the hardest 6-epidemic version yet.
A game takes about 45 minutes to complete, but another 5 minutes to set up. The production values are high, all the components feel well-made (out of plastic and cardboard). There are a number of expansion sets, but I haven’t played them. There are also some alternative “scenarios” online – essentially alternative rules. I found a couple of official scenarios while writing this, available here, and here. I’ll have to give them a try.
Pandemic is a game that gets so much right. The pacing and balance is near perfect. The idea of a cooperative board game is new to me, but works very well. I can highly recommend giving this game a try if you have the chance.
This year I went to the Game Developer’s Conference, held every year in San Francisco (usually sometime in March). I have written about my impression of the conference here. The short version is it was both inspiring and depressing. So this post is just a link to some photos and interesting points.
In 40 years I have never seen anyone defecate on the street. A claim I can no longer make after a week in San Francisco – I have now seen it twice. I will definitely stay in a better area of the city next time I go.
Apple laptops were everywhere, spotting a PC laptop was quite a rare occurrence. Surface tablets were about as common as iPads, and Android phones outnumbered iPhones.
A couple of speakers espoused taking your own path in indie game development and being original, but were introduced as having worked on anodyne AAA games.
The last fortnight I have been very busy starting the marketing on Concealed Intent. Sadly (to me) I haven’t had much time to write code. Far more time has been spent writing words in order to let people know about the game.
Just a couple of days ago I put Concealed Intent up on Steam Greenlight. If you have a Steam account, please go vote for it here. Feel free to have your friends, acquaintances or just passersby vote for it too.
For those who don’t know, Greenlight is the way for Indies to get their games on Steam, the largest PC/Mac game distribution platform. It is very important to any PC/Mac game’s success. It can take several months to get through the Greenlight popularity contest (there is no time limit), which is why I have started now, some months before completing the game.
There is also a video trailer of the game in action on the Greenlight page, or you can see it YouTube below.