Category | Description |
1. | Experiment Scope |
Version | 1.0 |
Project Name | The Score Portfolio Experiment |
Purpose | The Score Portfolio Experiment explores whether a compensation-adjusted scoring formula influences portfolio outcomes within crowdfunding and P2P investing.
The experiment does not attempt to identify the best investments, predict defaults, or replace investment due diligence.
Instead, the experiment observes how portfolios constructed from different segments of the Allocation Score spectrum behave throughout a full investment cycle.
Particular attention is given to opportunities across the score spectrum, including the lower, middle, and upper score segments.
The experiment intentionally allocates capital to score extremes in order to observe whether extreme scoring characteristics produce meaningfully different portfolio outcomes.
The experiment also compares score-based allocation decisions against automated investment products provided by selected platforms.
This allows the experiment to observe whether a simple scoring methodology produces meaningfully different outcomes from commercially available passive investment solutions.
The experiment does not attempt to:
Predict future returns.
Identify the safest investments.
Replace investment due diligence.
Replace risk analysis.
Guarantee profitability.
Provide investment advice. |
Capital at Risk | The experiment uses real money and publicly reports portfolio outcomes.
Capital is at risk and investors may experience delays, defaults, partial losses, or total losses.
The methodology is experimental and should not be considered investment advice. |
Hypothesis Testing | Can a compensation-adjusted scoring formula produce meaningfully different portfolio outcomes? |
Simplicity Principle | The framework intentionally prioritizes simplicity.
The Allocation Score is an experimental approximation rather than an attempt to model reality perfectly.
The methodology does not claim to identify the best investments, predict performance, or determine investment risk.
Instead, it provides a transparent and repeatable scoring mechanism that can be applied consistently throughout the experiment.
The score intentionally places greater emphasis on compensation than capital commitment while still accounting for investment duration.
Investors are encouraged to challenge, adapt, modify, or replace the scoring formula according to their own assumptions and objectives.
The purpose of the experiment is not to prove that the Allocation Score is correct, but to observe the outcomes produced when the score is applied consistently over time. |
Scope | The experiment is limited to euro-denominated crowdfunding and P2P investments available to retail investors.
Investments with contractual maturities exceeding the planned experiment duration are excluded.
The selected investment universe may be adjusted if platforms cease operations, materially change their offering, or become unavailable during the experiment. |
Duration | 60 months |
Starting Capital | €500 per portfolio |
Monthly Contribution | No additional contributions.
Each portfolio develops naturally through repayments, recoveries, interest payments, and reinvestment decisions. |
Reporting | Weekly portfolio updates.
Monthly portfolio reviews and key observations.
Public documentation of any intentional framework overrides.
Public documentation and versioning of material methodology changes. |
Expected Outcome | The experiment aims to improve understanding of the relationship between:
Compensation
Capital commitment
Portfolio behaviour
Allocation Scores
through a transparent scoring methodology.
Particular attention is given to the behaviour of Low Score, Mid Score (Market Norm), and High Score portfolios and whether meaningful differences emerge between them over time. |
Early Exit | The experiment is intended to run for 60 months.
Early termination will only occur if continuation becomes impractical or impossible due to legal, operational, financial, or personal circumstances.
Any early termination, along with the circumstances leading to the decision, will be publicly documented.
Portfolio results, observations, and lessons learned up to the termination date will remain part of the experiment's recorded outcomes. |
2. | Score Portfolio Construction Methodology |
Methodology Disclosure | This methodology is published in full as part of the public experiment.
The objective of the Score Portfolio Experiment is transparency, repeatability, and independent verification. All core concepts, formulas, selection rules, and portfolio construction principles are publicly available.
Future reports, observations, datasets, or supporting materials may be published separately. However, the methodology itself is intended to remain openly available as part of the experiment. |
Portfolio Segments and Selection Principle | The experiment consists of three score segments and one benchmark segment.
Each portfolio receives an equal starting capital allocation.
The initial capital is distributed equally across the selected platforms.
Future allocations are determined by the methodology and the availability of eligible opportunities.
Low Score Segment
Represents opportunities with the lowest Allocation Scores.
Select the lowest-scoring eligible opportunity.
Mid Score Segment (Market Norm)
Represents opportunities around the median Allocation Score and serves as the experiment's Market Norm reference point.
Select the median-scoring eligible opportunity. If the median is between two options, select the one closest to the average score.
High Score Segment
Represents opportunities with the highest Allocation Scores.
Select the highest-scoring eligible opportunity.
Benchmark Segment
Represents automated or managed investment products provided by the selected platforms.
Select only automated or managed investment products. If there are several auto-invest products available on the selected platform, select the one with the longest investment duration. |
Allocation Score Principle | The methodology evaluates opportunities using an Allocation Score. The Allocation Score combines:
Interest Rate
Investment Duration
into a single value.
The objective is to measure compensation while accounting for capital commitment.
Formula:
Allocation Score = Interest Rate % × (Reference Period / Loan Period)^0.2
Reference Period = 36 Months
Interpretation
Higher interest rates increase the score.
Longer investment durations reduce the score.
The duration adjustment is intentionally limited to ensure that interest remains the primary score driver.
Important Limitation
The Allocation Score is not:
An investment recommendation
A risk score
A quality score
A safety score
A return prediction model
The score is simply a scoring mechanism used within the experiment and should not be interpreted as a measure of investment quality or expected success. |
Spectrum Allocation Principle | The methodology intentionally allocates capital across different parts of the Allocation Score spectrum.
The Allocation Score is primarily driven by interest rate, with investment duration acting as a secondary adjustment factor.
As a result, low-scoring opportunities will generally contain lower compensation opportunities, while high-scoring opportunities will generally contain higher compensation opportunities.
The experiment does not assume that higher scores are better or lower scores are worse.
The Mid Score Segment represents the center of the score distribution and serves as the experiment's Market Norm reference point.
Low Score and High Score segments represent deviations from this reference point.
The experiment observes whether opportunities closer to or further away from the Market Norm produce different portfolio outcomes over time. |
Tie-Breaker Principle | When multiple opportunities satisfy the requirements of a portfolio segment and have identical Allocation Scores, the following hierarchy is applied:
Step 1 – Higher Interest Rate
If Allocation Scores are equal, preference is given to the opportunity with the higher interest rate.
Step 2 – Shorter Duration
If Allocation Scores and interest rates are equal, preference is given to the opportunity with the shorter investment duration.
Step 3 – First Eligible Opportunity
If Allocation Scores, interest rates, and investment durations are equal, preference is given to the first eligible opportunity identified by the experiment.
The purpose of the Tie-Breaker Principle is to provide a transparent and repeatable method for resolving identical Allocation Scores without introducing additional risk assessments, platform-specific metrics, or subjective judgment. |
Eligibility Principle | Only currently investable opportunities are considered.
The methodology does not evaluate:
Risk analysis
Borrower quality
Management quality
Platform ratings
Country ratings
Financial statements
These remain the responsibility of the investor. |
3. | Portfolio Framework |
Portfolio Lifecycle | 1. Build (Months 0-1)
Objectives:
Build portfolio
2. Observe (Months 1-48)
Objectives:
Monitor portfolio performance
3. Exit (Months 49-60)
Objectives:
Stop reinvesting
Close remaining positions
Calculate final results |
Reinvestment Principle | No new capital contributions are added.
Capital is generally reinvested on the platform where it becomes available.
The experiment does not transfer capital between platforms solely to satisfy minimum investment requirements or facilitate reinvestment on another platform.
As a result, cash may remain temporarily uninvested on a platform until sufficient capital becomes available or an eligible opportunity is identified.
Reinvestment follows the same portfolio segment rules used during the initial allocation. When capital becomes available:
Repayments
Recoveries
Interest payments
the portfolio applies the methodology again and reinvests according to its score category. |
Capital Deployment Principle | The objective is to allocate as much available capital as possible while remaining consistent with the methodology and available opportunities.
Any remaining capital may be held as cash until additional eligible opportunities become available. |
Metrics | Outcome Metrics
Score Portfolio Value
Measures the current value of the portfolio. Used to determine the current portfolio leader.
Formula:
Portfolio Value = Current Cash + Current Investments
Score Actual Portfolio XIRR
Measures the portfolio's realized annualized return based on actual portfolio cash flows.
The metric is calculated using Microsoft's Excel XIRR function applied to realized cash flows, including contributions, repayments, interest payments, recoveries, and withdrawals.
Actual Portfolio XIRR is reported as an observed outcome and not as a measure of success or failure.
Score Portfolio Cash Drag
Measures the proportion of capital currently not invested.
Higher Cash Drag indicates a larger proportion of portfolio capital currently not deployed into investments.
Formula:
Cash Drag = Available Cash ÷ Portfolio Value
Score Portfolio Health Score
Measures portfolio health by tracking the distribution of capital across:
Formula:
(Current Capital * 1 + Late Capital * 0.5 + Defaulted Capital * 0.25 + Recovered Capital * 0.75 + Written Off Capital * 0 ) /
(Current Capital + Late Capital + Defaulted Capital + Recovered Capital + Written Off Capital )
Interpretation:
Current Capital receives full weight.
Recovered Capital receives reduced weight because the capital has been recovered but was previously impaired.
Late Capital receives reduced weight due to increased uncertainty.
Defaulted Capital receives a significant penalty due to the risk of future loss.
Written Off Capital contributes no positive value to the score while remaining part of total capital.
Score Portfolio Default Rate
Observe permanent portfolio losses.
Higher Default Rates indicate a greater proportion of permanently lost capital.
Formula:
Default Rate = Written Off Capital ÷ Total Allocated Capital
Portfolio Characteristics
Score Portfolio Average Allocation Score
Formula:
Average Allocation Score = Σ(Allocation Scores) ÷ Number of Investments
Score Portfolio Average Interest %
Formula:
Average Interest % = Σ( Interest %) ÷ Number of Investments
Score Portfolio Average Duration in Months
Formula:
Average Duration in Months = Σ(Duration in Months) ÷ Number of Investments
Score Portfolio Number of Investments
Measures the number of active investments held within the portfolio.
Formula:
Number of Investments = Count of Active Investments |
