April 16th, 2013 – Dear Lending Club Investor: Adapt or your returns will suffer.
April 16th, 2013
Update: LendingClub talks about this issue in this press release (dated 4/20/2013)
It’s a pretty well agreed upon fact that Lending Club‘s popularity has increased in recent months. While it’s a great thing that Lending Club‘s loan origination rate remains high, an important realization to make is that the average loan In-Funding time has fallen significantly over the past two months. Please consider the following chart:
As you can see, the average amount of funding outstanding on notes currently in funding at any one time has been on a continually decreasing trend. What this would imply is (coupled with the ever increasing origination rate) the average time in funding is probably decreasing (assuming that the average loan size remains consistent). This thesis is confirmed in the following chart:
It is my belief that the average Lending Club investor is going to have to get more sophisticated as time goes on in terms of note identification and timely note investment in order to capture the best returns. If these current trends continue into the future, it may eventually get to the point where in funding times are measured in hours, not days – especially on the notes that are deemed attractive because of a perceived lower default risk./higher yield.
In order to begin addressing this issue, P2P Analytics has a new feature: The P2P Analytics Daily cut. The daily cut is a daily release (in html format) in which the top notes are identified via the P2P Analytics selection algorithm and are presented to subscribers for quick and easy investment. This feature is online and active now in the member’s section.
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