Investor Risks

Investments in Receivables portfolios (loans and equity stakes) may be characterized as Alternative Investments. They are highly illiquid and should be rated as “highest risk class”. Only experienced, professional investors should consider this asset class. Amongst the many risks that may arise from investing in this asset class, we mention some:

Market risk

  • Economic crisis & economic cyles may affect the number of debtors in default
  • But may from time to time result in increased average debt burdens per debtor in default
  • Collection rates may vary and/or decrease

Liquidity risk

  • Tradability of loan investment in portfolios is probably low (illiquid market)
  • Sale of equity stake in distressed receivables portfolio to competitors (controlled auction) may not be possible from time to time and/or may require a discount on the market value

Receivables portfolio risk

  • Concentration risk of debtors within a specific portfolio: amount
  • Concentration risk of portfolios over: country, industry, age, location, gender, ageing

Collection risk

  • Valuation is based on historic performance, hence there is no guarantee on the value of a portfolio acquired
  • Seller is not allowed to change business policies & procedures
  • Performance of collection company may deteriorate over time

Interest rate risk

  • General market interest rates may rise, which may result in a lower valuation of receivables portfolios

Other risks

  • Regulators may have increasing influence and/or introduce new legislation which may negatively influence collection rates and/or payback periods
  • Timing and/or payment pattern of distributions to investors are unpredictable
  • Portfolios structured in separate SPV’s which are fully “ring-fenced” and bankruptcy-remote
  • Tax risks: VAT, corporate income tax rate, energy tax
  • Currency risk
  • Rising influence from pressure groups

Special reference is made to the Disclaimer.