IT’S OVER: Conclusion of the Investment Year & the Final Ranking

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The competition has ended and the final ranking has been established. It was a crazy year: not only did we experience the worst investment year since the Global Financial Crisis; we also witnessed a most-exceptional vote by the Britons to leave the EU that may put the whole union in great danger. Besides these global events, we also witnessed some unique events in our very own competition: two groups managed to return -100%, which has never occurred before in B&R history. Yes, we’re talking about the legendary Quants and their copycats from Taurus, who have made us entirely forget about how Rising Investments was the greatest loser in B&R history last year. Striking as this may seem, you might be even more astonished to see your group below them in the ranking, as Quants and Taurus are in 19th and 20th place respectively. Apart from them, by far most groups ended the year in negative territory and it’s been the worst B&R Investment year in history. However, six celebrated groups managed to make profits and they should receive some applause. 

Investment Group

Although the exact intra-top-five ranking will not be revealed until the End-of-the-Year Barbecue on July the 8th, it is needless to say that these groups have done very well. Therefore, we congratulate you! The fact many new groups did very well, shows that in the investment world experience is definitely no guarantee for success, as well as that investment novices are certainly able to succeed.

One of these new groups, TMT Investments, managed to get a nice positive return of 4.17% with a very low volatility. The group that is in last place, on the other hand, is one of the more experienced groups: CMG Investments. The Brexit ruined their Sterling position and made them plummet to the lowest rank last week. They weren’t the only ones however: the same happened to AAP Investments. Alpha Investments also took a last-minute plunge as their Barclays turbo long vaporized. By contrast, Ad Infinitum, this year’s most volatile group, managed to gain 19% in last-minute returns.

All in all, this year might be one that would be better to forget about, investment-wise at least. In order to help you with this, on the 8th of July you are all very welcome to join us for dinner (if you subscribed) and a whole bunch of beers at the End-of-the-Year Barbecue. We as B&R sincerely hope that you, despite the bad returns, enjoyed your time with us and we hope to see you all again next year!

Written by Justin van Haaren

34. Ranking 30-06-2016

The Rise of Crowdfunded Equity & Debt

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There really is only one way to effectively minimize your portfolio’s risk: diversification. It’s investment basics, and thanks to the internet it’s easier than ever. Don’t stick to one asset class and don’t just stick to one style of security within each asset class. Digitalization and the internet have opened up a myriad of new opportunities. First came the online banking and the online brokers; but now we’re seeing a wave of innovative investment and financing solutions. Crowdfunding is a great example. It has reached the equity and debt markets, and it’s growing at a tremendous pace. You can now invest in companies that aren’t listed on the stock exchanges and can extend the scope of your portfolio even further.

Crowdfunding

With the right tools you can invest in private or family owned businesses that aren’t on the market. You can be an angel investor or invest in the seed rounds of countless start-ups. You can even go local and lend to local businesses seeking funds. The opportunities are truly intriguing.

Crowdfunded Equity

Crowdfunding equity is still very young, so there are many sites to choose from. Big names include crowdfunder.com, crowdcube.com, or seedr.com. Even indiegogo is planning to start offering equity deals, although this may still take a while. However, equity funding websites are pretty localized due to regulation differences, so most regions still have their own market leaders.

But they all basically work the same. A company looking for funding sets the amount they need and the amount of equity that they are willing to give in return. Once the goal is reached, investors receive a share of the equity equal to their share in the funding. The sites provide the legal documents that need to be filled out and take care of everything, but due diligence can never hurt.

And how do the returns look? It’s hard to say considering how young these markets are. Signori and Vismara (2016, WP) found that investors on crowdcube.com had an annualized return of 8.8%. According to AltFIData, their index of crowdfunded companies had an IRR of 2.14% in 2015.

Crowdfunded Debt

Crowdfunded debt has grown tremendously as well, driven by the unsatisfied demand of small businesses and start-ups for debt financing. The big names include Funding Circle, Lending Club, and Prosper, but again, regional differences persist.

Also known as peer-to-peer lending, it works similarly to equity crowdfunding. Companies seek to raise a certain amount of capital which is provided by many different, usually smaller, investors. Principals are paid directly and on a monthly basis, over a period lasting about three to five years.

But whether it’s crowdfunded debt or equity, never forget the fees that these platforms have. In most cases the states rates will be without considering fees, which can significantly reduce your returns.

Equity crowdfunding and peer-to-peer lending offer investment opportunities which did not exist before. They can be a great tool for diversifying your portfolio or for getting a piece of that promising start-up. But even if these platforms seem too risky at the moment, the incredible growth of this sector will soon lead to better regulation, more legitimate platforms, and less risk.

Written by Lorenzo Heinbuch