Mintos Invest & Access: why you should not use it

What is Mintos Invest & Access?

Last summer Mintos launched his new hands-off product: Invest & Access (see after I&A). This product has the purpose of taking away from investors any burden as to how they invest their money on the platform. Investments are automatically done by Mintos based on a proprietary algorithm that invest on multiple lenders reflecting the offer on the marketplace.

Mintos has been very keen in promoting this product. Some new investors did not even realise, when signing up on the platform, that they agreed to automatically invest using it. They ended-up with their first deposit invested through I&A.

The main caracteristics of I&A disclosed are the following:

  • Loans with buyback guarantee
  • Rated by Mintos from A+ to C-
  • Adjust to the loans’ availability on the marketplace to maximise diversification
  • Only from lending companies present on Mintos for at least 1 month (reduced from 6 months previously and it remains contradictory information on the platform). UPDATE March 2019: there is no more delay before including a LO which makes it even worse than before.
  • Portfolio size from € 10 to € 500 K. Mintos advises to invest at least € 500 to enable a proper diversification. The ceiling started at € 100 K was previously raised at € 200 K and now € 500 K. It shows the willingness of Mintos to stear as much funds as possible in that tool…
  • Cash out instantly your current loans (depending on market conditions)

Drawbacks of Mintos I&A

I do not think investing using I&A is the best solution to build up a balanced portfolio in terms of risks and returns. I will list below the reasons why you should not use it and rather build up a proper portfolio with the Auto Invest function.

The announced “advantages” of diversification (check here what is diversification really about and the limitation when it comes to picking up loan orginators) and instant liquidity are more than offsetted by the following drawbacks:

  • You cannot pick your loan originators (LO), which leads to:
    • the inclusion of fragile LOs: several LOs have already run into troubles on Mintos, being able to select them is crucial. Buyback guarantee is not bullet proof.
    • not being able to filter out LOs not paying interests for late loans and/or having a long grace period which impact your returns.
  • You cannot set a minimum interest rate, which leads to:
    • a bad risk/return balance with LOs not always providing the best returns for the corresponding risk level.
    • investing in loans with lower returns than using Auto Invest stategies and potentially below your minimal interest rate target for crowdlending (risky investment per nature).
  • You cannot set a maximum maturity, which leads to:
    • having a maturity mistmatch between your portfolio and your own investment horizon. Some investors reported having loans with over 16 years maturity. You rely on the market conditions to be able to sell them for the current ones and you are stuck with them as soon as they become late.
  • You cannot manage country risks. I&A will not enable you to do it but you may want to exclude some countries from your portfolio:
    • for being beyond your risk tolerance such as politically instable countries.
    • due to regulatory changes: e.g. newly imposed maximum interest rates endangering payday lender business; radical decisions such as removing licences of several lenders (Kosovo; Philippines).
  • The instant liquidity is an empty promise:
    • Only current loans can be sold using the cash out function.
    • Even selling current loans is subject to normal market condition, meaning you need other I&A investors to buy them.
    • Mintos mentions they are working on the possibility to sell late loans on the secondary market. However, for now, it means you are stuck with late loans and cannot cash out part of your portfolio contrary to investors buying manually or using autoinvest.
  • Suspicion of I&A buying on secondary market (see below).

Does I&A buy from the secondary market?

Mintos does not say clearly whether I&A do invest on the secondary market as well. Many investors reported on social media having bought loans from loan originators in troubles before their suspensions from secondary market suspecting these purchases occured on the secondary market.

This situation could happen and be repeated in the future. For example, when the Central Bank of Kosovo removed the licence of Monego, rumours have circulated for several hours on facebook and part of the investors managed to sell their loans on the secondary market before Mintos prevented it. In such situation, I&A investors could buy loans from loan originators getting into troubles without having any control over it (investors using Auto Invest can at least pause their autoinvest strategies).

In addition to those testimonials and Mintos not clearly stating whether I&A invest on primary market only or on both, the below screenshot from the Help section makes me think that it may actually be true:

It’s normally not possible to buy pieces of loans below € 10 on the primary market. This is a hint that I&A would invest on secondary market as well and an additional reason to avoid using this feature in my opinion.

Conclusion

Mintos offers different way of investing from the most simple to the most sofisticated. It is easy to sell dreams to investors that they can invest without putting in any efforts and just wait for the interests to pile up.

However, this is a bad idea from the investor perspective. If you invest that way you are the dumb money. You give up control over Mintos about where you monies go and you should have in mind that your interests are not aligned! Mintos needs all loans to be bought, included those with lower interest rates, not offering interest on late loans and originated from more fragile loan originators!

For all the above reasons you should disregard I&A and build up a proper list of autoinvest strategies – or invest manually if you prefer – that reflect you own choices and criteria.

I hope this article will convince some of you to shift away from I&A.

If you are not yet an investor on Mintos and are interested you can find my link on the bonus page but please not to invest using I&A. If so, use the link of another person 😋, as I failed to convince you.

Cheers!

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