The Financial Markets Authority (AFM) has recommended all crowdfunding platforms in the Netherlands to publish the average net return of projects placed. The average net return for investors at Crowdrealestate is 5.49%. This article explains its calculation and compares it with, among others, the weighted average of all other crowdfunding platforms in the Netherlands.
AFM recommendation
The interest rates offered (gross return) of all crowdfunding projects in the Netherlands differ enormously, as do the collateral levels. Crowdfunding platforms with a higher average gross return generally have more arrears and write-offs.
The Netherlands currently has 41 active crowdfunding platforms, about half of which have published the average net return in line with the AFM's recommendation. It is expected that the recommendation will soon become an obligation and all crowdfunding platforms will have to comply with it.
The calculation (AFM method)
According to the AFM, the net returns should be shown as the average interest minus the deducted items minus the platform's costs. Each month, the average net return should then be updated. This allows investors to better estimate the net returns they can achieve and understand the risks associated with the investment.
The comparison
The gross returns of all crowdfunding projects in the Netherlands range from 1.0% to 20.0%. The weighted average of these is 7.49% (October 2018). Crowdrealestate's weighted average gross return is 5.65%.
Of all crowdfunding platforms that calculate the average net return according to the AFM methodology, the weighted average is 3.33%. Crowdrealestate's average net return is 5.49%. The difference between the gross and net returns of the entire crowdfunding market is significantly larger than for Crowdrealestate. This large difference can be explained by the fact that the largest crowdfunding platforms in the Netherlands offer projects with a relatively high gross return and end up underperforming. A few even have a negative average net return. Time will have to tell whether this is due to the selection policy of the projects offered and/or has other reasons.
Sources: https://www.afm.nl/nl-nl/nieuws/2018/apr/rapport-crowdfunding-informatievoorziening, http://www.crowdfundingcijfers.nl/lening-portefeuilles/, https://www.crowdfundmarkt.nl/crowdfunding-data
The following crowdfunding platforms have published the average net return according to the AFM methodology: All4Funding, Capital Circle, Collin Crowdfund. Crowdrealestate, Greencrowd, Investormatch, Kapitaal Lokaal, Kapitaal Op Maat, Knab Crowdfunding, Lendahand, Mass Financing, Matching Capital, NLInvesteert, SamenInGeld, The Dutch Deal, Voordegroei, Waardevoorjegeld, ZIB Crowdfunding.