In the second episode of the Lend Academy podcast (first episode is here) I am excited to welcome Larry Ludwig of Investor Junkie on to the show. I have been following Larry’s blog ever since I started blogging about p2p lending because he was one of the few people writing about p2p lending when I started.
He provides detailed reviews of Lending Club and Prosper on his site where he shares his investment strategy. In our discussion I wanted to go a bit deeper into his thoughts about the industry. He certainly has some interesting perspectives. Larry is one of the only people I have met who was interested in consumer credit as an asset class before he discovered p2p lending. We talk about that and much more.
Here are some of the topics we covered in this interview:
- Why Larry was interested in investing in consumer credit even before he knew p2p lending existed.
- The mistake he made when he first started investing with Lending Club.
- How his strategy has changed over the years.
- Why he still prefers to invest manually.
- How he has adjusted to the more competitive environment for investors.
- What the Lending Club IPO will mean for investors.
- The main problem with the trading platform.
- Why p2p lending is not really a new industry.
- Why he is not too concerned about the prospect of increasing interest rates.
- Where p2p lending fits into an overall investment portfolio.
- The biggest risk to our p2p lending investments.
- The expectation for his returns going forward.
If you want to subscribe to the Lend Academy Podcast you can do so in iTunes or Stitcher. And since we are still so new I would appreciate it if you could leave a review in either place to let me know what you think. Of course, as always you can also share your thoughts in the comments section below.
Podcast: Play in new window
Joe Toms is the only person who has been a C-level executive at both Lending Club and Prosper. He was the managing director at LC Advisors, Lending Club’s registered investment advisor subsidiary from 2010 to 2011, then he left Lending Club to become the Chief Investment Officer at Prosper. He remained in that position until he resigned in February of this year.
I got to know Toms quite well during his days at Prosper and have kept in touch with him since he left. He is one of the most knowledgeable people in this space and I was curious what his next more would be. In a phone conversation yesterday he filled me in on Freedom Financial Asset Management (FFAM is a division of Freedom Financial Network LLC) where he is now President and Chief Investment Officer. In January they are launching FreedomPlus, a new consumer lending platform.
So what is FreedomPlus? Is it a new p2p lender? No. But it will be originating consumer loans for investors. It will not feature a marketplace like Lending Club or Prosper but it will be open to accredited investors to invest in pools of loans.
The big news for their launch is the announcement today of a $125 million investment from Vulcan Capital, which is Paul Allen’s (the Microsoft co-founder) family office. This money will be used to invest in consumer loans originated by FFAM and marks one of the largest investments ever made by one investor in the online consumer lending space.
Catering to “Emerging Prime” Borrowers
What kind of borrowers is FreedomPlus focused on? When I asked this question Toms gave quite a lengthy answer. First, he pointed out there are approximately 80 million people in this country with a FICO score of between 600 and 749. Of these around half will remain stable or improve their credit score in the coming 12 months. These are the people that FreedomPlus will be targeting, a group he calls “emerging prime” borrowers.
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