Update 28.3.2020: Serious concerns around this platform as well. I've been following some online discussion and the platform might be in trouble. Not yet what kind, but definitely very concerning.
How Grupeer works
What I like about Grupeer (the same thing I love about Mintos), is that they broker loans that have already been financed. The loan originator has already decided the loan is good and has at minimum 5% "skin in the game". Grupeer simply provides a mechanism for the loan originators to sell the loans forward - refinance them. This way, the loan originator gets a quick return on the loan and has the principal back, free to be loaned out again. Also, an investor may jump on a loan mid-way if the loan originator still has a claim to sell. This makes things very flexible and you don't need to wait for a loan to be filled - as it already is before it lands on the platform.
So far my internal rate of return has been around 13% on Grupeer. Use the following compound interest calculator to see for yourself what those rates would do to your portfolio in the long run:
Remember though, past performance is in no way a guarantee of future.
Loan deals
Loan deals are e.g. mortgages, car loans, business loans, personal loans but includes also development projects. These vary in size, length and interest. Most loans are 11%+, but there are some that go over 13%. Most loans are non-amortized, which means loan principal will be paid back at the end only, while interest continues to be paid through the loan duration.
There are some amortized loans however, even at the 13% level. The main benefit of amortized loans is that your principal is returned to you every month. If your portfolio was 12,000€ invested in 12-month loans, you'd get on average 1,000 of your principal paid back every month, plus interest. If you suddenly needed cash, there would be a natural source for it, without selling loans on the secondary market (not yet available).
Some loan deals do have collateral: Ibancar loans have cars and A24 Finance loans real estate.
Some loan deals do have collateral: Ibancar loans have cars and A24 Finance loans real estate.
Development projects
Development projects are the typical real estate projects, usually very big and often take about a year. Development projects are in fact a subset of loan deals. For reasons unclear to me, Groupeer takes large loans and splits them into smaller chunks (e.g. 50,000€) on the list. You should pay attention to them though, since both the duration and interest can vary, even if the project is the same.
The best thing about development projects is that they have collateral. So, in theory, even if the loan originator goes belly-up, there's still a good chance that investors can recoup some of their investments. Development projects never seem to be amortized, which means whatever you invest in them, will be tied for the duration of the loan.
Grupeer buyback guarantee
All of Grupeer's loans have a full buyback guarantee, backed by the loan originator. The buyback guarantee kicks in when the loan is over 60 days delayed. The loan originator buys back the principal at that point, and also the interest. This is pretty sweet. That means that for as long as the loan originator doesn't go belly-up, the investor is safe.
Grupeer risks and managing them
So you've read about the buyback guarantee, collateral etc. What risks do I see?
Grupeer is operating at a loss (2018 profit/loss -statement). Then again, lots of startups do. How are they funded? What happens if they go bankrupt? Best to download all your agreements from the platform, just in case!
Grupeer is operating at a loss (2018 profit/loss -statement). Then again, lots of startups do. How are they funded? What happens if they go bankrupt? Best to download all your agreements from the platform, just in case!
The largest risk to me is the counterparty risk relating to the loan originators. I haven't researched them. I hope Grupeer has! As we learned from Mintos, if a loan originator becomes insolvent, the buyback guarantee stops working for that loan originator. I asked Grupeer about this over an email and they clarified that indeed, the investor carries the risk over a loan originator's insolvency (which they claim is a rare case), but Grupeer will fight like hell for the investors. Pushing the loan originator risk to the investor does protect Grupeer from catastrophes.
To manage the loan originator risk, make sure you diversify across multiple loan originators. The Auto-Invest doesn't allow for forced diversification, so what you can do is create multiple strategies, one for each loan originator. I haven't done this yet myself, but I will when I increase my portfolio on Grupeer.
Low liquidity causes a risk. What if the stock market takes a huge dip over summer and your capital is tied to 12 month non-amortized loans? You'll be left out. Your car might suddenly break and need maintenance. Clearly, liquidity is better than no liquidity and to combat this, having a mix of amortized loans can help.
Fraud is another big risk. We've seen what happened to Kuetzal and Envestio. Could the same happen to Grupeer? Sure could.
Fraud is another big risk. We've seen what happened to Kuetzal and Envestio. Could the same happen to Grupeer? Sure could.
Conclusion: too much risk
All things considering, I'm giving Grupeer two stars ⭐⭐. I fear they might not survive this economic situation. I've recently heard bad rumors about the quality of their loan originators, even claims that some of them might be fake. Not sure what to make of it, but I'm personally pulling out from the platform. The risk-to-return ratio isn't worth it for me.
Thanks for reading!
