The MoolahSense Edge: The Platform of Consistent, Superior Risk Adjusted Returns

Investors February 02nd, 2018
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Last week, The Edge did a cover story on crowdfunding and shared valuable insights of the industry. As the pioneer of the industry, MoolahSense weighed in on risk management and how auto allocation feature help investors.

Quoting The Edge’s article, “The participation of finance professionals is also creating a heightened sense of awareness of the whole crowdfunding sector, which could hasten its development into a mainstream asset class”.

Patricia Howe, a retired banker, has invested a six-figure sum across 5 crowdlending platforms in Singapore and has seen as much as 22% returns on some loans in a year.

As the first digital lending platform to receive the full CMS license, MoolahSense is excited and proud of the growth of the market. The steady increase of registered investors suggests that professional investors are now considering us as an investable alternative fixed income asset class.  

In fact, based on our historical data, investors on MoolahSense who spread their exposure across at least 20 loans on MoolahSense would have achieved a Sharpe ratio of 3. The average risk-adjusted returns is at 12%.

Updated as of 30 Nov 2017

On a risk-return basis, that is attractive and [investors] would want to put some of that into their portfolio.” Douglas Streeter Rolph, senior lecturer of banking and finance at Nanyang Business school, said.

How do we make digital lending better?

As we always mention in our articles and blog posts, we always encourage investors avoid punting and to approach investing with a risk-averse mindset.

Related Article: The Winning Strategy: Avoiding The Punting Trap

The main goal should always be to earn superior consistent returns.

While some cautious investors may be more anxious about default rates, some aggressive investors may focus heavily on the “highest” returns they can get instead. No matter what your investing style may be, these are just intermediate metrics that may interfere with your main goal, which should always be to earn superior consistent returns.

In order to do that, you will need a well-diversified portfolio to better manage your investments and risks. By dividing your capital across various campaigns, you are able to balance out the returns and losses that you may incur in individual investments.

Recall the sharpe ratio from earlier?

Investors who invested in 20 campaigns or more were able to achieve a sharpe ratio of 3, of which by Investopia’s standards is considered excellent.

The True Impact of Auto Allocation

One particularly interesting point that The Edge highlighted was the “auto-invest” feature available on digital lending platforms. On MoolahSense, that is what we call the “Auto Allocation”.

Johan Sulaeman, associate professor at the National University of Singapore’s Business School, mentioned in The Edge’s article that “Diversification obtained from auto-allocation does improve portfolio performance in the case of specific borrowers defaulting”.

And indeed, based on statistics of investors activities on our platform, investors who have subscribed to Auto Allocation (AA) service have shown to be more profitable in their investment journey.

Average # of Loans per Investor Risk Adjusted Rate of Returns
AA Investors 14 Loans 15.79%
Non-AA Investors 8 Loans 11.91%
Total 10 Loans 12.08%

Table accurate as of 26 Jan 2018.

The objective of Auto Allocation is to provide an automated order execution tool to facilitate investors’ ease of making investments which meet their specified industry, note type and interest rate parameters.

The convenience provided by such automated order execution may also provide investors with “a means of diversifying their exposure across loans offered by the platform,” said Lawrence Yong, CEO of MoolahSense.

The purpose is to allow personal portfolio construction, to help investors achieve diversification and to achieve excellent and consistent risk-adjusted returns.

You can set investment preferences for the following:

  • Investment amount per campaign (min. S$100)
  • Total number of campaigns
  • Investment frequency
  • Note types
  • Industry
  • Target Interest rate

With MoolahSense, investors have an opportunity to diversify their portfolio and fully utilise the Auto Allocation tool for convenience of order execution.

MoolahSense: The Better Platform For Diversification

At MoolahSense, we publish an average of 2 to 3 new loans each day. Investors can easily start their investment journey with a minimum investment amount of $100. This also allows investors with smaller capital size to still effectively build a diversified portfolio and earn consistent superior returns.

Take charge of your financial destiny today!