Here is a comment from Aaron Vermut on 04/04/2013 from his Prosper blog that I find interesting on the issue of retail investors vs institutional investors. I really like the fact that he's working on a solution to what has become a pretty big issue:
"First of all, let me state that we are committed to servicing both retail and institutional investors equally. I think it’s pretty clear that retail lenders alone cannot get Prosper to profitability. The question is, how do we keep the retail investors happy while simultaneously meeting the needs of institutions so we can grow? There are institutional lenders that, for legal and/or strategic reasons can only purchase whole loans. Additionally, if we put everyone in the same pool, the institutional investors with their greater resources can develop technology to grab the attractive loans before the retail investors have time to even look at the listings. This is not a “level playing field”.
The best solution to meet everyone’s needs is to have two separate pools. In the fractional pool, we will be limiting anyone from purchasing more than 75% of a single loan thereby ensuring that retail investors can get a crack at the desirable loans rather than watching them get snapped up by large investors using the API. The whole loans pool, as said, will be listed a little earlier, the whole loan buyers can purchase what they need, and then an hour later the rest go back to the fractional pool. There is no favoritism between each pool. Loans are randomly selected.
As I have mentioned above, we are testing the whole loan program in “beta” right now and hope to be able to officially launch it soon. We will continue to monitor and test and if there are unforeseen consequences that make this strategy inherently unfair to one group or another, we will iterate and improve. Keep the good constructive posts coming!"