I just registered with Wellesley and spent a long time on the phone with them trying to understand the structure of their fixed maturity investments. In particular I was trying to work out how they deal with the mismatch in maturity between the fixed term of the product and the maturities of the underlying loans.
As it was explained to me, the auto-matching process distributes my investment across all outstanding loans in approximate proportion to their size and subject to the condition that I will not be invested in any loans that have a maturity that exceeds the term of my chosen investment. The auto-matching will continue so that my exposure is always to the whole loan portfolio and not just the portfolio as it stood at the time of my investment so ideally if Wellesley continues to grow their loan book my diversification will increase with time.
So far so good but as the fixed maturity of my investment approaches, the loans to which I was initially exposed will roll off to be replaced from a diminishing pool of loans that satisfy the constraint of maturity less than the remaining maturity of my investment. My credit exposure will thus become increasingly undiversified. I was told that there were no specific portfolio diversification limits to stop this happening.
Have I misunderstood what is going on because to me this seems like a considerable weakness in the structure of the fixed term investments?
I don't think this can be right. I have an 18 month investment maturing 3.10.15 and it is spread over 484 loans as of 27.9 with 6 days to go. AFAIK there is no way to interrogate the individual loans to find their redemption date, but they are numbered and the 484 loans range from numbers 008 to 920.
On their site W say: Auto-Matching runs once a week, matching lenders to every single loan on a volume weighted basis.
I have a nearly similar number of loans on an 18 month loan (it is an 18 month old, 3 year loan) at 479 loan parts. But this number includes duplicates. Wellesley have 119 loans according to their statistics page. Looking carefully I can see that there are several repeated numbers in my list.
Redemption risk does seem to be higher than average with Wellesley.
Redemption risk may be higher than some other platforms, but the OP suggested that the investment could not be spread over loans with a longer redemption than the investment, and this cannot be correct. You are right about the duplications but with just 3 days to go my investment is spread over 119 different loans.