Octopus Investments has announced today that it will stop transactions from its property-backed peer-to-peer platform, Octopus Choice, with immediate effect. This includes all new investments and withdrawals.
The decision has been taken in order to protect the best interests of its investors. Because of the extreme market conditions there are a higher volume of investors trying to sell down or liquidate their investments in recent days.
Octopus will now no longer take a platform fee, which will instead be added to investor returns.
Status of the current loan portfolio
Octopus will endeavour to return capital back to investors as soon as possible for outstanding and future withdrawal requests.
The current loan portfolio will continue to be monitored and serviced as normal. Interest will continue to be paid and credited to investor accounts. Similarly, as individual loans mature, the proceeds will be returned to investors as cash, rather than being reinvested. Money invested into the Choice IFISA will be kept within the ISA wrapper and Octopus will work with investors to complete ISA transfers as needed.
As soon as more normal market conditions return, Octopus will do everything it can to return the platform to the expected level of liquidity.
Each loan on the platform is secured by a first charge on a property asset and the average loan to value ratio (LTV) across the portfolio is conservative at 64%. Octopus has also invested more than £13 million of its own capital spread across every loan on the Choice platform and sits in ‘first-loss position’. This means that if any investors lose money on any of the loans, the first 5% lost is taken entirely by Octopus.
Taken together, property values would have to fall by approximately 40% for an investor to lose any capital on the average loan across the portfolio. However, this is different for every loan, and a higher LTV would mean that a smaller fall in the property’s value may result in a loss on that loan.
Ruth Handcock, CEO of Octopus Investments, said:
“Today we made the very difficult decision to stop all transactions for Octopus Choice, which we believe is in the best interests of investors in the current and unprecedented market conditions.
“We did not take this decision lightly and we are acutely aware that the lack of immediate liquidity may cause further challenges for investors. That’s why, going forward, Octopus will not be taking a fee from the Choice platform. Instead, this will be used to increase returns to all investors.
“While we clearly can’t predict the future, the current loans have been performing as expected. We have always been very cautious about the loan to value across the portfolio and there is a significant buffer in place for investors, even if the current market turmoil continues.”
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For journalists in their professional capacity only. The value of an investment, and any income from it, can fall as well as rise. Investors may not get back the full amount they invest. Past performance is not a reliable indicator of future results. Money invested through Octopus Choice is concentrated in loans backed by property and could be affected by market conditions. For the same reason, instant access to invested capital cannot be guaranteed. Peer-to-peer investments are not protected by the Financial Services Compensation Scheme (FSCS). Personal opinions may change and should not be seen as advice or a recommendation. We do not offer investment or tax advice. We recommend investors seek professional advice before deciding to invest. Octopus Choice is provided by Octopus Co-Lend Limited, which is authorised and regulated by the Financial Conduct Authority (722801). Issued by Octopus Investments Limited, which is authorised and regulated by the Financial Conduct Authority. Registered office: 33 Holborn, London, EC1N 2HT. Registered in England and Wales No. 3942880. Issued March 2020.