It’s been awhile since I’ve updated our Lending Club performance so I thought I’d share some details. As you may be aware, we’ve been winding down our holdings there, though we still have a decent chunk of money there (around $2k) and it’s still performing reasonably well.
Last March our portfolio looked like this:
- 266 loans were current
- 146 loans had been paid off
- 3 loans were currently 16-30 days late
- 9 loans were currently 30-120 days late
- 28 loans had defaulted and/or been charged off
and our net annualized return (NAR) stood at 7.6%.
As of now, our portfolio looks like this:
- 202 loans are current
- 205 loans have been paid off
- 0 loans are currently 16-30 days late
- 11 loans are currently 30-120 days late
- 34 loans have defaulted and/or been charged off
with a current NAR of 7.1%.
So yes, our returns have slipped as we’ve faced a steady trickle of defaults, but 7%+ isn’t anything to sneeze at.
In case you’re wondering, it’s been about 20 months since we last bought adding notes to our portfolio so it’s definitely aging. And yes, we’ve faced a steady trickle of defaults as time has gone by. But still, 7%+ isn’t anything to sneeze at.
What about you? If you’ve been investing with Lending Club, how are things going? When reporting your results please be sure to give us an idea of how many notes you’re holding and how long you’ve been at it.
Lender in Lending Club since January 2012
NAR 21.18%
70 loans total- each at $25-$50 per loan
Fully Paid (2)
In Funding (0)
Issued & Current (67)
Late 16 – 30 days (0)
Late 31 – 120 days (1)
Default (0)
Charged Off (0)
I forgot to note on my post that I don’t use automatic investing, I filter the notes based on my chosen criteria and then I read every note individually before I decide to invest in it. Time consuming yes, but I feel more comfortable doing it that way. Currently I am not putting much new money into Lending Club, just reinvesting the principal and interest paid back to me. I am also now only investing in notes where the income is verified.
But still, I get defaults. Many of them come early in the process. Some people only pay for a couple of months, then stop paying and declare bankruptcy. It seems that maybe they try to borrow money to get some cash before they decide to give up on paying people back. Matt, at least with buying on the secondary markets, you can buy notes that are sufficiently “aged”, where the risk of default is lower.
As long as my NAV is better than what I can get from a savings account, I guess I will stick with Lending Club. But it is unsecured debt and there is also the risk of LC not making it as a business. I believe they still are not operating in the black. I dropped back from Prosper early on because I was afraid the company might not make it long term. This is why I don’t have too much money in peer-to-peer lending. I started as an experiment, but I don’t want to get large amounts in vested. About $10,000 is about all I feel comfortable with right now.
Well, you’re right. Talent or lack of talent has nothing to do with your results. I don’t use the LC automatic investment tool, I use my own procedure, so again there’s a massive difference between our investment styles, so to speak. You’re right, most investors will not get what I get………..but they could approximate it, & some have.
And incidentally, my performance does make me way above average but I’d (not so humbly) assure you that it’s hardly random because it’s something that I’ve duplicated with the 4 other accounts that I currently run or oversee.
And BTW, Rob Garcia left Lending Club over a year ago, so I guess a lot of your notes were from the dark days of 2008 where returns were low & before my time. Best of luck in your future endeavours. I’m gone for the rest of the day.
Dan,
How do I explain my -3%? I talked about it back in the day with Rob Garcia, who was formerly an executive with LendingClub. He investigated and reported that my activity was nothing unusual, and concluded that I was simply very unlucky with defaults.
I used the LendingClub automatic investing tools, and I invested in an average “medium” level of risk. There is no “personal talent” involved — at least in my personal activity there.
If you look the curves on the LendingClub site, you’ll see that as expected it’s something resembling a normal distribution, in which case there will be outliers. I was unfortunately one of them. At 13.5% annualized return, you yourself are also a bit off from the average.
The difference between your returns and mine had nothing to do with diversification, and the readers of this blog shouldn’t expect, on average, neither your nor my performance (though definitely they should expect something closer to yours than mine!)
But my recommendation to consider a junk bond ETF wasn’t related to my own performance at LendingClub. The junk bond ETF expected performance is at least “comparable” to that of P2P, and for those making large investments, I think the tax reporting risk and the liquidity issues might not compensate the premium.
Well, then how do you explain your -3% result at Lending Club compared to my 13.5%+ returns over the approximate same time period ? Am I just that much luckier than you?………….Or would you rather suggest that I’m just that much more talented than you? I’ll let you decide which one you prefer to go with. 🙂
Dan,
Who said the junk bond yield is carved in stone?
Anyway, you can lose capital in P2P lending in exactly the same way you can lose capital in a junk bond ETF.
FYI — diversification has nothing to do with amount invested. It has everything to do with number of things owned. For most things, you achieve the majority of the diversity effect after about 35 (see the article on this website from Apr 2010). Before I started winding down my investments at LendingClub, I had several hundred notes. The diversification effect between a portfolio of several hundreds of notes and thousands of notes is insignificant.
A junk ETF may be yielding 7% but while it certainly is liquid, it can also suffer from loss of principal & fluctuate substantially, as we all know. So that yield isn’t carved in stone, nor is it necessarily indicative of your total return. Or need we go back to examples of the carnage from 2008?
I’m sorry if you didn’t like the tone of my post. I didn’t particularly like the tone of yours either. Some less enlightened individuals might have understood your comments as indicative of the potential of this investment class. In fact your post seems to be more a comment on your less than stellar performance compared to other investment classes.
Compared to some above average performers who are highly diversified & not just investing a few thousand dollars of play money, as you put it, your ETF example is a bit less impressive.
Dan,
The blog articles ends with, “What about you?” to which I provided a summary of my performance history at LendingClub and Prosper. And that’s what I did — provided another data point to the discussion. I don’t really understand the tone of your reply, as I speak for nobody other than myself.
I’ve spoken with the staff at LendingClub, where I’ve had a total of about $10k invested, and they believe that I’ve just been unusually unlucky with defaults, as my investing patterns (number of notes invested, note amounts, etc.) were typical of their users.
I’ve been winding down my investments at LendingClub during 2012, and I presently have less than 200 notes there. I don’t recall how many notes I had back when I was investing equally with Prosper. I always used the automatic investment tools.
At Prosper, on the other hand, my base returns investing in the same risk level of notes (approximately) was much better, and was “typical”.
At both LendingClub and Prosper, I’ve only invested in 3-year notes.
On the secondary markets, I’ve purchased them through FolioFN. Currently, I own about 350 secondary notes, with an average value quite a bit more than I’d typically buy in the primary market. Why? Because there’s no automatic investment mechanism on the secondary market. Since it requires taking the time to actually review and buy individual notes, I try to by larger note there; in fact, I buy the largest notes I can with the cash available (and I buy about once per month.)
My comment about junk bond ETFs was directed (as I said) to those considering P2P as a “fundamental asset class in their portfolio”. At that level of invested capital, I suspect that you probably will need to invest in larger notes, in which case you will run into the headache of having to report income from individual notes on your tax return (see the article on this blog, from Feb 2011.)
The JNK ETF is currently yielding about 7%, doesn’t suffer from those tax issues, and provides the liquidity that P2P doesn’t.
Matt…….What is of course missing from your rambling post is important information like the size of your portfolios in terms of number of notes & also whether your 12% secondary market performance is included or excluded within the -3% & 8% numbers. Are they merely subsets of these numbers? How many did you purchase in the secondary market?
Without all the above information your post loses most of its meaning & brings up serious questions as to how much you understand about what you’re writing about. What is even more interesting is that you feel so comfortable making assertions on the comparable performance that everyone else might enjoy based on your personal results vis a vis a Junk Bond ETF during the most positive (& unrepeatable) last few years of high yield bond performance. That is quite brave of you, & quite possibly wrong as well. There are many people (myself included) who have been investing for around 3 years or more, have large number of notes, & who have handily outperformed you. See my post above for my results. You certainly don’t speak for me!
Over four years with LendingClub, I earned -3% (yes, a loss). In my time there, I invested in a “medium” risk level.
I’ve done better at Prosper, where for approximately the same risk level, I’ve earned about 8%.
Where I’ve really done well, is buying notes in the secondary markets at both LendingClub and Prosper, where I’ve been earning consistently for more than two years over 12%. I’ve created a formula for identifying the notes on the secondary market that I’m willing to buy, and that’s worked well.
Having said all that, I still consider my investments at both P2P providers as “play money”, and not as a primary asset class. I think anyone seriously considering P2P as an asset class could do just as well buying a junk bond ETF, with less headaches (especially considering the tax treatment).
I’ve looked into Lending Club a number of different times but haven’t started an account yet. It’s nice to see a real example of someone using it.
My rate is 17.82%. But, I have only funded 17 loans since February. I’m not sure if I will fund any more. You basically have to hope that people pay, and there is no recourse if they do not pay.
Lender in Lending Club since summer of 2009- 3 years, although bulk of loans were made in the last year.
NAR 9.87%
577 loans total- each at $25 per loan
Fully Paid* (54)
In Funding (4)
Issued & Current (510)
Late 16 – 30 days (1)
Late 31 – 120 days (7)
Default (1)
Charged Off (9)
We have similar systems in the UK to Lending Club, but it is something that I am yet to venture into. Returns look healthy though!
Personal acct LC:
Acct. opened Oct. 2009
Average age of portfolio……1yr 3 months
Portfolio balance 82% 3yr loans, 18% 5 yr loans
1337 are current
184 paid off
0 loans late 16-30 days
0 loans late 31-120 days
6 loans defaulted/charged off
NAR…………13.56%
ROI…………15.1%