Big Fundr-Safe compared to fd/ssb?

[mybc1960]

I have been introduced to this big fundr by a relative recently which is offering a higher interest rate(depending on period of investment) compared to fd/ssb.Supposed the capital amount and interest is guaranteed by maxis cash.Understand the company is exploring a new concept of guaranteed higher interest compared to fd and ssb.

Invested some money in one of the project'. In view that capital sum and interest is guaranteed by maxi cash would like to seek comments and opinions on risk before committing any furthur.

Those who want to make any enquries should go directly to them as i am in no position to advise since not part of their organisation


https://www.bigfundr.com/

 

[a4973]

Hmm, interesting!!! Camping here for other's comments.

 

[reddevil0728]

Guaranteed by maxi cash doesn’t mean much.

full faith and credit of a triple A rated government bond vs a company is very different thing

 

[BBCWatcher]

The bottom line is that if Maxi-Cash goes bust (completely or even very selectively, it looks like) or misbehaves, you lose. This is not a sovereign or quasi-sovereign bond, and it hasn't even been assessed by a bond ratings agency. There's no SDIC backstop, no deposit insurance.

Maxi-Cash is telling you that they're taking your money and betting on overseas real estate, so far exclusively in Australia. Thus their investments have both mortgage default and foreign currency exchange (SGD-AUD) risks. They will keep most of the upside because they must to try to avoid default with you, plus they want a profit.

It's a bit hard to tell, but it looks like Maxi-Cash reserves the right to pass along the underlying real estate project risk to you on a selective basis. That is, it looks like each project has a standalone risk profile. So when you contract for one project, if that particular project goes bust and Maxi-Cash cannot keep you whole from that one project's prior cashflow/upside, you lose. They haven't indicated whether they pool the risk across projects, so you should assume they don't. But even if they did pool risk across projects it'd be exclusively Australian risk (AUD and the Australian real estate market) since they don't have any projects anywhere else yet. If either the Australian dollar or the Australian real estate market crashes (or both), Maxi-Cash is in trouble and therefore you're in trouble.

On top of all that, what's the interest rate they're offering? They don't really say, but the example on their home page is a little below 3% on a 12 month hold. Does that mean you're assuming substantial risk? Of course it does. "Just look at the yield" versus 12 month government bond rates (SSBs for example).

You can already bet directly on overseas real estate via REITs and REIT index funds. If you want to take real estate mortgage default and foreign currency exchange risks, you can already do that on your own and capture all of whatever upside is available.

So...do you want to lend someone your Singapore dollars to go buy an Australian REIT that holds one building somewhere in Melbourne (for example)? At ~2.9% (for example)?

 

[BBCWatcher]

Great marketing language, though. I’ll give them that!

Here’s what they’re actually offering: loan them your Singapore dollars at promised ~2.9% interest so they can go punt your money on a single building in Australia (with an Australian dollar mortgage).

Here are the key words they sprinkle in their marketing copy to distract you from what they’re offering: cash, guarantee, regulated.

What could possibly go wrong?

I’ll pass, thanks.

 

[mybc1960]

Thanks for all above comments

im also risk adverse mainly subscribing to fd/ssb and those insurance single premiun deals. covered by sdic and government.these big fundr project period varies from 5 months to a year with interest rates 3.1 to 3.5.Actually my main concern is company maxi cash bust

 

[BBCWatcher]

If you want to bet on Australian real estate then just do that directly and at the lowest possible cost you can find. For example, Vanguard has an exchange-traded fund (ETF), symbol VAP, that trades on the Australian Stock Exchange (ASX). VAP is an index fund that invests in Australian listed/traded REITs. It has a modest expense ratio of 23 basis points, and you can buy and sell it via Interactive Brokers for example. Because it's an index fund it'll be much more diversified than a single building. But it'll still include a lot of AUD-SGD exchange risk and real estate sector (as a whole: commercial, industrial, retail, residential) risk.

I don't think you should do this, but you could.

 

[limster]

This is of course a worse deal than buying retail bonds in a company doing property investment/development
and there was so much fear spread about Frasers, Oxley , Aspial, and Perennial Retail bonds but in the end all the SGX retail bonds had no issues (I happily collected my interest payments for Perennial/Frasers while others spread fear).

I think Bigfundr makes more sense than unsecured P2P lending which has (justifiably) acquired a pretty bad reputation. Unsecured P2P lending is a win-win situation for the platform and the borrower. The platform gets all its fees upfront, and the borrower knows that the platform has no incentive to spend its hard cash on legal fees to recover the loan in the event of default.

Maxi-cash's guarantee of your money and its co-investment gives it an incentive to ensure that valuations are fair that the 70% LTV is 'real', and also an incentive to go after the defaulting party to recover the loan. (P2P as mentioned there is no incentive).

Maxi-cash is probably thinking that it is highly unlikely that it will be called upon to pay out from its guarantee because defaults can be satisfied from the forced sale of the property in the event of default (70% LTV). If investors are provided details of the property/location, they can also DYODD on (1) property valuation (2) risk of property price crashing below the 70% LTV buffer). Hint: avoid any loan to build houses in the desert 100km+ from the nearest major city?

There are other issues such as whether the buildings have been built yet or whether the investment is in new builds? In those cases, valuation could be based on expected completed value so there is added project completion risk (not clear from website).

But Bigfundr is interesting in its potential to disrupt banks. This is something to pay attention to. Imagine if REITs start using this model to borrow money from investors to fund their property acquisitions instead of traditional methods.... so instead of constant dilutive share offerings to fund purchases or bank loans, they can use the Bigfundr model for investors to 'invest' in loans? I think REIT investors will all be queuing at ATM to press for it.

 

[gold_eagle36]

Good for boomers.

 

[yiron]

Maxi-cash as guarantor? Not much of an assurance there...

https://www.bondsupermart.com/bsm/a...s-to-upsize-its-3y-sgd-6-05-bonds-RCMS_247020Maxi-Cash had a cash position of SGD 14.1m at 1H21, but a portion of it is used as security for bank borrowings (2020: SGD 5.3m). The group may have used some cash for the tender exercise but liquidity may improve through this bond offering. Its cash and cash equivalents was not able to cover its short-term debt of SGD 230.2m at 1H21. Net debt to equity for the company is high at 239.7% with a heavy reliance on bank borrowings and debt issuance to fund its operations.

The new issue has a price guidance of 6.05% with a tenor of 3 years. Together with its low cash balance and heavy reliance on debt, its gearing ratio may be at an uncomfortable level for investors.

 

[churnmaster]

We have seen one sovereign default and the west trying to create another sovereign default. The largest real estate player in China defaulting on its debt and the major central banks talking about sucking out liquidity. This is definitely not the time to chase such opportunities. When big money stays out of such opportunities, retail shouldn’t bother to invest.

 

[Spirax]

At least safer than P2P lending, but rather they stated the interest, duration and redemption fee upfront better

https://seedly.sg/reviews/p2p-lending/

 

[adven7]

sound like land banking investment like Walton

 

[Shiny Things]

Yeah, this is a terrible investment. Compared to an FD or SSB, there's so many ways it can go wrong:
* The Australian real estate market falls over
* The AUDSGD FX rate takes a dive
* MaxiCash falls over
* They can't sell or rent out the units
* The builder in Australia goes bust
... and in return for all that extra risk you're getting a fraction of a percent over SSBs? That's not a safe investment, that's MaxiCash betting on the Aussie real estate market with YOUR money.

 

[Darkestknight]

Yeah...most probably want to keep their money in banks and continue to get nothing in return...whilst the banks ..in return ..uses their "free" deposits ...( approx ..average monthly savings deposit of about usd 1.4 trillion in SG) ...to do exactly the same thing that such platform does..and keep all the earnings..so they can declare big profits every qtr and give their CEOs big big pay rises and bonuses...even during pandemic years...go figure that out!!.. and by the way SDIC..only guarantee 75k in each account..not 100%..hmm..am I missing something here ..I remember vividly countries going bankrupt, big funds and banks collapsing..in the last 10 years..and people camping outside hk banks demanding their money back...did they get anything?? Well at least in the worst case here..1st charge on real estate means better than ZERO...

 

[reddevil0728]

Yeah...most probably want to keep their money in banks and continue to get nothing in return...whilst the banks ..in return ..uses their "free" deposits ...( approx ..average monthly savings deposit of about usd 1.4 trillion in SG) ...to do exactly the same thing that such platform does..and keep all the earnings..so they can declare big profits every qtr and give their CEOs big big pay rises and bonuses...even during pandemic years...go figure that out!!.. and by the way SDIC..only guarantee 75k in each account..not 100%..hmm..am I missing something here ..I remember vividly countries going bankrupt, big funds and banks collapsing..in the last 10 years..and people camping outside hk banks demanding their money back...did they get anything?? Well at least in the worst case here..1st charge on real estate means better than ZERO...

what's the takeaway?

 

[Darkestknight]

Takeaways...pros and cons in everything in life..go in with open eyes..invest with the amount that we can bear to risk..and pray..low risk low returns..that's life

 

[tangent314]

Your little rant is really based on a false dilemma, presenting FDs as the only alternative remaining if not investing in this MaxiCash rubbish.

 

[CrashWire]

Yand by the way SDIC..only guarantee 75k in each account..not 100%

This is common practice in a lot of countries.

I would assume this is because if you do have more than 75k with a bank, you should be resourceful enough to know how to diversify your assets.

 

[BBCWatcher]

This is common practice in a lot of countries.

Well, it’s rather low compared to Europe (100,000 euro), the U.K. (£85,000), or the U.S. (US$250,000) as examples. It’s “amusing” that you can deposit insure more Singapore dollars held at Interactive Brokers LLC (U.S.) than at DBS. A lot more.

I would assume this is because if you do have more than 75k with a bank, you should be resourceful enough to know how to diversify your assets.

I suppose, but S$75,000 is no longer enough to cover 25% down on many HDB flats. That only gets you to a S$300,000 HDB flat, not a giant number these days. I think that ought to be one benchmark metric for determining how much deposit insurance there ought to be. S$200,000 feels right because that’ll get you into a S$600K HDB flat (25% down) plus leave some left for day to day household needs.