First investment analysis
This is a follow-up to the previous article so feel free to take a look at it if you want to invest but are held back by fear.
The first risk management case (found here): a bond on senior service residence with an interest rate of 11% with a quarterly payment.
In this case, I can see 4 risks:
- the company issuing the bond fails
- the senior residency market faces a crisis
- the intermediary is not reliable
- House price crash
Market risk
In my country, there are many elderly people (age 75+) and the target population has been growing over the years due to multiple factors: growth of the elderly population, well-being and well-aging awareness.
There is nonetheless a limiting factor: the population must be able to afford the residency.
In this case, the residence will be in Carcassone, France. According to the Insee in 2014:
the territory of Carcassonne is driven by strong demographic attractiveness. The agglomeration offers a wide range of facilities and services while having low-density housing. Well served by the communication routes between Toulouse and the Mediterranean coast, it also enjoys great tourist appeal, thanks in particular to the city of Carcassonne and the Canal du Midi. Agriculture, and viticulture in particular, occupy a large place there and tertiary jobs have developed there. However, the region is experiencing difficulties, too few jobs with a low share of productive jobs, a significant share of part-time work, high unemployment and low incomes which in the long term can become so many handicaps for its attractiveness, an essential driver to its current development. Diversifying its economy, adapting its housing and services for an aging population constitute important challenges for this new entity.
With a population of around 47k, 10% being 75+, 30% retired, the only concern here is about the population income. There is still a high-income population with for example 8,2% of Executives and higher intellectual professions in 2020.
Without being an expert, the number of senior service residences available seems too low for the retired percentage of the population.
The market risk is low in my opinion.
Intermediary analysis
An article I found online shows that the intermediary is reliable in the sense that it doesn’t steal your money, but there is another problem:
Tudigo’s return on completed projects (23 since 2017) is -37% for a holding period of around 3 years.
Since 2017, Tudigo has earned its users €2.3m in interest
But, since 2017, Tudigo has caused its users to lose €4.3m of capital with an additional €1.2m who have experienced a repayment delay of +6 months.
The default rate (delay +6 months & definitive loss) in amount on expired projects (we remove projects in progress) is 57.3%!!
If you invested €10k in all Tudigo projects since 2017, your money would have been blocked for 3 years and you would have recovered only €6.3k at the end to try to get a 10% return (i.e. €3k). You would therefore lose by having adopted this strategy.
This here shows there is a big risk, as the intermediary doesn’t analyze each project and the failure probability is high.
The worst signal here is that in case of failure, the recovered amount is really low. The intermediary risk being this high, the analysis stops here, I would never invest with such an intermediary.
On the next article, we will cover another investment analysis.
