Abundance Review P2P- Earn While Being Green (Updated 2020)

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Summary of Abundance Review: Abundance have been around a relatively long time. They have commendably stuck to their values which result only offering only investments that benefit society or the environment. This has led to a smaller amount of projects being written. It is therefore harder to diversify (although there is a secondary market at a price). Rates of interest vary as well as quality of project. However, his may be worthy of consideration if you like their proposition.

Here is how it compares to other similar P2P platforms which offer loans based on assets and property development:

PlatformLinkTarget Rate (%)My XIRR (%)StatusLive Rating
Review9-12%-1.43% (estimate)CLOSED0.5/5
ReviewUp to 16%-5.4% (estimate)CLOSED1.5/5
ReviewUp to 7.2%7.23%OPEN4/5
ReviewUp to 11%5.72%OPEN4/5
ReviewUp to 13%0.03% (estimate)CLOSED2.5/5
ReviewUp to 8.5%3.27%OPEN2/5
Review4-5%4.56%OPEN3/5
ReviewUp to 8%1.89%OPEN3.5/5
Review4-7.5%3.36%OPEN4/5

What is Abundance?

Set up in 2012, the company formerly was known as Abundance Generationand focused on the crowd-funding of renewable energy projects. Investors paid up front to finance developments and then to received returns. These were based on the sale of assets and/or the electricity generated from them.

A structural shift occurred in that government subsidies were cut for these type of projects. As such these became less common. Whilst Abundance still offer these type of investments, they also now offer other loans in ‘Transition’ and ‘Housing’. In general, projects which improve the environmental impact of the supply chain or low-emission housing solutions.

So whilst the investor-facing mechanics of the platform work pretty much the same as others, Abundance’s core offering is the choice of sustainable loans. With other platforms chasing money at all costs, this is investing with more of a conscience. The rationale for projects is spelled out pretty clearly in environmental terms, perhaps even more so than the monetary side.

Here is a table showing Abundance’s main features:

Established2012
Advertised Returns4.5%-15%
Investment TypePower generation, property development
Loan SecurityAssets
Minimum Investment£5
Cash DragConsiderable
Secondary Market?Yes
FeesNo (only on SIPP)
Provision Fund?No
Auto Invest?No
Available in ISA?Yes
FCA Authorised?Yes
Active on forum?No
Sign-up offers?None

Unfortunately if you have visited hoping for an Abundance sign-up bonus, there is none to be had here presently. Bonuses exist on the platform instead. For example for certain loans you can receive an additional cashback once the initial target is reached.

Operating Model

Abundance is relatively easy to operate from an investor point of view. Once you have signed up and passed the initial checks, you can fund your account either by bank transfer or debit card.

There is no auto-invest options available on Abundance. This is likely because loans are not high in number and also infrequent. However, there are three different type of accounts that can be opened. There is a standard account which you can manually invest from, or you can hold your investment in an ISA or a SIPP. Standard accounts and ISA’s are fee-free, but the SIPP has fees attached. Please seek further advice to ensure that this is the product for you before opening.

There are two ways to invest in projects.  You can view projects that are currently funding and are available for investment. This screen brings up details about the project with a downloadable project sheet which gives more details about the loan and how it is to be financed.

An additional way to purchase loans is on the secondary marketplace. This is slightly more complex than other secondary markets. It works on a bid system with reserve prices (similar to eBay). So entering bids for parts of loans does not guarantee an acceptance.

Loans are structured as debentures. The majority of these work in a similar way to other loans. Interest is paid yearly with the capital repaid at maturity. Other loans are slightly more complex where electricity-generating assets are concerned. These repay small parts of capital from revenue flows and/or a fixed rate of interest.

How are funds protected?

Like all firms dealing with these types of loans, investor funds are not protected by the FSCS (Financial Services Compensation Scheme).

There is also not a discretionary provision fund to protect investors from missed payments.

Instead, loans are secured on assets and charges over the businesses.

Abundance Review Pros:

There are a few things to like about Abundance:

Differentiated by loan type: Abundance is perhaps the best known platform which targets environmentally sound investments. Whilst individual investors have negligible impact on their own, a success here could drive some real change.
Good track record: With a low number of investments so far, it appears that the process for approving loans is tighter. Whilst some loans have run into loan delays (a common feature across platforms) it does appear that monitoring is good.
Longer term: Most of Abundance’s projects are much longer term – for instance some energy projects have a 15-year time frame. This may hopefully suggest that interest of all parties are aligned and not short-term.
Higher interest rates: As we may expect, the loans on Abundance pay a higher rate of interest than personal loans based P2P lending, although the risk is higher.
Low minimum investment: Unlike other platforms the minimum investment is very low, from just £5 per loan.

Abundance Review Cons:

Lack of Projects: The rate of new project issue is slow, no doubt because their requirements limit the amount of loans available. For the investor, it may be hard to get good diversification in projects. The secondary market relies on others selling their loans, and often you will need to pay above the odds to get invested.
Weaker asset security: Loans are often secured on assets or builds in-progress. Whilst they may be valued in the loan offering at their completed value, if they are to be sold in an incomplete state the value often is much lower, and in some cases no value at all. The infamous Assetz Capital turbine loans being a salient example.
Riskier loans: This has led to some increased risks on loans, in particularly power generation loans. These do not have a great reputation, and indeed Abundance have run into problems beforehand.
Lack of liquidity: With many projects longer-term and less individuals using the platform, liquidity may be tough to come by here and investments may be locked away for some time.

My Abundance Investment Strategy:

I have no position here. Whilst I can appreciate the green side of the loans, I feel that being invested in other platforms has already given me enough exposure to the asset classes Abundance has. If I were to invest again, here is what I’d do:

Avoid low-interest loans: Some loans are not well-paying at all, and pay under 5%. This to me does not reflect the risks involved.
Keep investments small: Diversification here takes a long time, perhaps several years, and I refuse to buy loans on the secondary market at large premiums, which many sellers appear to want. By keeping investments small, value at risk is reduced.
Asset balancing: I avoid putting all funds in one type of loan, for example power.

CONCLUSION OF ABUNDANCE REVIEW

Abundance offer an interesting class of loan which may be of interest to investors. With long project times and no auto-invest, the loans may require a greater degree of scrutiny to ensure that they do end up being viable. Diversification is harder here due to the limited number of loans.

Disclaimer: This Abundance review represents my own opinions and should not be substituted for investment advice. Please research before you invest with any firm. Typically P2P investments are not covered by the Financial Services Compensation Scheme (FSCS) in the way bank deposits are, and there are no guarantees that you will receive the returns advertised (or even a return at all).

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