Updated on 12-01-2020 with reason #7

After about a month of carefully consideration I decided to move out of Envestio.

It was not an easy decision. Envestio was giving me a very good interest rate, with no missed payments. On my monthly report sheet it was looking very well. But there was some changes at Envestio recently that me and many other investors became uncomfortable about.

I constantly re – evaluate my investments to see that the revenue is still worth the risk and so should you! Its not the first time I am making a change and it will not be the last. My readers are always informed first when I decide something, altough this does not mean you need to do what I do. Every person needs to decide for themselves if they think the return is worth the risk.

This will not move me away from investing at all. I will be re-allocating investments mainly to Mintos (75%) and the rest to ETFs (25%).

Four recent changes why I got my money out

Change #1: a new CEO (Rittsman)

When a young company has a change in leadership it’s always a reason for concern. You can expect that you will want to know why leaderhship was changed, and mostly what the new CEO is about. What are his values, and what makes him the right person to give your money to. Because these platforms are often about rust. You expect this person to be trustworthy of your money.

I already commented in my previous portfolio blog post that I was very concerned about this as he was involved in selling a Pertetum mobile.

When asked about this by an investor called Philipp, Rittman claimed that there were actually Powerplants up and running. So he kept the claim that there was nothing wrong with investing in anything that can create energy from nothing.

Another blog asked more information to the CEO he got the following (read the full blog here):

So basically here the CEO is saying that he was selling energy coming from nowhere for a hobby. When asked to clarify more the following was answered:

So now it went from defending the organisation, to a hobby (where he wants to point out he was not so involved) to working as sales.

While its not possible to say if there is a fire, I can see some smoke.

Change #2: a new address

Envestio changed it’s adres on its website to what looks like a mailbox.

When you do a google search you can see there is 25(!) companies registered at the address. I have seen no official statement from Envestio on why they changed address and if this is a temporary measure. It could be an indication of financial problems.

Change #3: drop in revenue

While all throughout 2018 and up to half of 2019 Envestio has been making more and more profit in Q3, according to this report Envestio had a drop in revenue Q3 2019. While if Envestio goes bankrupt in theory you still have a direct claim on the projects, its clear that it will take a long time to get your money out, and you will not get as much as you would have. That doesn’t mean it will happen, but again you need to weigh the revenue with the risks.

Change #4: the secondary market is very crowded

Yes this did affect my decision. The large amounts of money that was leaving Envestio was a reason for concern. Because even if I trusted a CEO who was selling energy that came out of nothing, and trusted the financial situation of Envestio, any bank will fail when a ton of people take their money out. The amounts are also becoming bigger and are staying longer.

This could also be an indication of a healthy secondary market. Before it was always empty, while if you compare with Mintos there is always sales on the secondary market.

What the market does not show:

• Are people moving money out of investments that finished?
• Are people still bringing in new money?

Only Envestio has this information and we just need to do a guesstimate. To be honest the above information is publicly available and I see it go by on twitter, blogs and facebook groups.

Reason #5 its clear that projects take much longer to get funded

While before a project on Envestio was funded in a few hours, now it takes many days. The projects added on the 7th of January are not yet funded on the 11th of January (time of writing). However I do see the amounts that can be invested go down, so there is people who still have confidence in the platform.

Reason #6 I got more cautious after the Kuetzal scam

I admit it, when losing 4% of my p2p portfolio overnight with Kuetzal (ok its not sure yet I will lose it all, but right now I am giving it a 60% chance of total loss) I got a lot more careful. As a beginning investor making money seems more important sometimes then keeping your money safe. I changed a lot, and noticed there is Risky and safer p2p investments. Even if the safer give less interest, in the end they have a big chance to come out on top.

Reason #7 Envestio’s sister companies are renamed

One of the sister companies contains the collateral of the loans. So where is the collateral going? When we look closer we find that the new owner Alexander Novohatski has been mostly involved in companies that were deleted, creditors were harmed or tax collectors were harmed. You can view this here. Almost like he is a guy that they are putting in charge of dying companies,

There have been no announcements about Envestio about this change and that in a period that transparency is crucial in the peer to peer world.

Reasons to stay in

While there are some reasons to move out, and I have, the decision was not easy. I could have made the wrong one. I could think of some reasons to stay in..

Reason #1 Envestio is working on more transparency

Envestio is working on more transparency. I admit this is a rumor I heard, but from a good source, that Envestio is working on creating loan agreements for every investor for their investments, giving you a better legal claim in case anything happens. It would be a change for the first half of 2020. To be honest I hear this the day after I initiated a buy back otherwise I might have stayed in a bit longer to find out what exactly it was about.

Reason #2 Buyback is working excellent

When I did do the buy-back it went surprisingly smooth. The money appeared instantly on my Envestio account and after doing the withdrawal the money was on my bank account in 1-2 days. That shows to me that even after a month of people pulling their money out, they do not have any cash flow issues yet.

Reason #3: The projects still get funded

While its slower then before (not surprising given all the news of the new CEO and then the scam at Kuetzal), both new projects and projects listed by investors leaving the platform are still being funded. That shows that there is still confidence in the platform.

Reason #4 Interest rates remain attractive

A 15-20% interest rate is attractive. Its very hard to deny that. And we can see that projects never seem to miss payments. Is that because of master due diligence / project selection of the Envestio crew?

Reason #5 I did not see any hard evidence that made me conclude Envestio is a scam

You can be sure that the 100s of investors scammed by Kuetzal are now being extra cautious when investing. They have searched on information on many of the projects and mailed a few of them. So far they have found no indication that there is fake projects around.

Why I modified my investment strategy

The amounts I am investing in platforms is always an indication of the confidence platforms give me. You can see Mintos and Grupeer to be very high (percentage wise) in my portfolio, so as a starting investor I would recommend you start there.

I generally consider the lending platforms (Mintos, Grupeer, PeerBerry, Iuvo Group, NeoFinance) to be lower risk then the platforms where you invest in projects (Crowdestor, Monethera, TFGCrowd).

I do like a bit of Risk, but Envestio was keeping me up at night, and that is usually not a good indication that I should stay in.

In total I made 20 EUR loss going in Envestio because of the 5% buy back fee. So almost break even, and I am fine with that.

So what should you do?

Based on the above you could go either way. If you like high risk / high return and can turn a blind eye to the rumors around the current CEO then Envestio still might be a platform for you.

To those who do decide to stay in I really wish the best of luck! I hope that Envestio will continue to give you the returns you search for.

If you, like me, made the decision that the risk is to high for the potential gains then consider to look at different platforms to put your money in. Mintos or Grupeer for example, who give a lower return but in my opinion also a lower Risk.

I wanted to inform my readers asap of my decision to move out. Afteral I am aware that the fact I am investing there can convince some of my readers to do the same, so you should be the first to know if I decide to end my investments there.

Remember in the end its your money and your responsibility to always do due diligence.