Net Return Decomposition – UK Lenders

Published on September 29, 2017
Establishing a benchmark of return is a major milestone for any emerging asset class. AltFi Data launched our first return metric in March 2015 and have subsequently applied a consistent calculation methodology to a number of originators, in the UK, Europe and the USA, who have allowed us to work with their data. This allows like for like comparison between platforms, geographies, risk grades etc.
But an understanding of return is only part of the picture. As the sophistication of the asset class increases investors require an understanding of risk adjusted return. In effect investors want to know how much loss is incurred to achieve a given level of risk. i.e. does my net return of 5% come after losses of 3%, or losses of 5%? AltFi Data are now able to provide investors with directly comparable metrics to provide exactly this analysis. We can provide interest income, net loss and net return in a like for like comparable format to allow investors to understand how much loss is incurred to achieve a unit of risk. We then distill this into a single ratio. The result? A comparable measure of risk adjusted return. For that detail you will have to wait for the launch of our upgraded analytics tool. But below is a break out the individual metrics that combine to make up that analysis…
(N.B. analysis is aggregated across a number of UK plaforms).