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Announcing the Launch of Lend Academy Investments

by Peter Renton on March 4, 2014

Lend Academy Investments

Today is a big day for me and for Lend Academy. We are officially expanding our horizons into investment management with the launch of Lend Academy Investments. This is not a solo venture. I have partnered with two financial services veterans, Bo Brustkern and Jason Jones, in creating Lend Academy Investments, which is an SEC registered investment adviser focused on the p2p lending space.

Lend Academy Investments is all about making p2p lending easier to access for individual investors. Regular readers know the impact that institutional investors have had on this space and we want to turn the tables on that. We give individual investors a professional money management option using the same tools as the big guys. More on that later. First, I want to give you a bit of background.

How Lend Academy Investments Was Born

It was around two years ago when I first received an email from a reader asking if I would help manage their investments on Lending Club and Prosper. I thought about it at the time and decided against pursuing it. But on a semi-regular basis since then I have continued getting more requests like that one.

I began to think I really should expand into investment management but wasn’t sure I could do it by myself. That was my challenge; I didn’t have any background in finance. Then last year, through my work on the LendIt Conference, I met Jason Jones and Bo Brustkern. I enjoyed working with these gentlemen both of whom have a strong background in finance.

So when I got a call from Jason last summer about joining up with him and Bo to create a new investment management firm, I started to think about it more seriously. One of my concerns was that I wanted to maintain my independence and continue my work writing here at Lend Academy. Thankfully, they were not only supportive on this idea, they were insistent that I continue exactly as before. In fact, I believe Lend Academy will become even more valuable because both Jason and Bo will also be writing informative articles now in addition to my own.

In the end the decision was relatively easy. Investment management is a natural progression to the work I do here. And I feel this is a way I can help more people in a very tangible way. While I will continue to write about the leading industry players and share my investing knowledge, I know that many people simply do not want to do the work to invest themselves.

There are tens of millions of investors who have money in the stock market. But the vast majority of these people do not choose individual stocks and trade their own accounts. They invest in mutual funds and ETF’s and have a professional money manager make their investing decisions for them. I expect the same will happen as this industry continues to grow.

The Lend Academy Investments Service Offerings

1. Separately Managed Accounts at Prosper (in beta)

Our Separately Managed Account service is open to all eligible Prosper investors. Lend Academy Investments is hired as an investment advisor, our clients select an investment strategy and instruct us to manage their account on their behalf. We offer two flavors:

a) Conservative: We deploy a conservative loss minimization model to invest in the loans that we think have the lowest likelihood of default, which are mainly AA and A grade loans only. Our target Net Return (after fees) is 5%.
b) Balanced: We deploy a diversified filter that invests in every loan grade. Our target Net Return (after fees) is 7.5%.

Our minimum investment size is $25,000 and our annual fee is 0.95% of assets. We are currently in beta but are open for both accredited and non-accredited investors. Please bear with us during our beta launch. Our on-boarding timing and our process controls may be slower and more cumbersome than expected as we perfect our back end systems.

2. Lend Academy P2P Fund*

Our P2P Fund will be diversified across both new and established P2P platforms from around the world. We are launching with three leading US platforms: Lending Club, Prosper and Funding Circle USA. The goal of our P2P Fund is to provide access to the online lending asset class. In many ways, it is a reflection of the LendIt Conference in its diversification. We will apply sophisticated credit modeling while taking a moderately aggressive approach with our investments. Our P2P Fund offering will be for accredited investors only with a minimum investment of $250,000. Our annual management fee is 1.5% and our target Net Return (after fees) is 10%.

The online home for Lend Academy Investments is http://invest.lendacademy.com/. There is some basic information on that site now and we will be expanding it over the coming weeks and months.

My passion for this industry is only increasing. I truly believe that every eligible investor should have the opportunity to invest in p2p lending in his or her investment portfolio. And now for people who don’t want to do their own investing we are happy to provide an attractive solution.

You can read an article about our launch on Bloomberg today and our official press release is here.

* Lend Academy P2P Fund is offered solely to accredited investors (as defined under Regulation D of the Securities Act of 1933) who can demonstrate that he or she is qualified to invest in the Fund by a third-party verification under Rule 506(c) of Regulation D and who agree to be bound by the terms of the Fund’s offering documents.

{ 34 comments… read them below or add one }

writing2reality March 4, 2014 at 11:06 am

Congratulations Peter! This is big news for P2P Lending, and especially for those looking for a truly passive means to invest in the space. I wish you and your partners the best of luck.

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Peter Renton March 4, 2014 at 12:25 pm

Thanks writing2reality. I appreciate your support and loved the article you published today.

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Matt Kiggins March 4, 2014 at 11:16 am

Peter, congrats to you and the rest of the team at Lend Academy Investments on your recent launch! We here at Millennium Trust Co are very excited about the opportunity to work with you as you look to take the P2P space to another level. All the best!

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Peter Renton March 4, 2014 at 12:26 pm

Thanks Matt. Have loved working with Millennium so far and look forward to a long and fruitful partnership.

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Adam Limbach March 4, 2014 at 1:11 pm

Congratulations and best of luck to you. Do you intend to use leverage in the P2P fund? Obviously you can either target 11.5% gross-of-fee returns either going after riskier credits if you think you have a better scoring model than Prosper/Lending Club or lever investments in higher quality loans.

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Peter Renton March 4, 2014 at 3:30 pm

For our first fund we do not intend to use leverage – we may offer this option down the road. And I am very excited about our scoring models for LC/Prosper.

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RawRaw March 4, 2014 at 2:09 pm

Congratulations Peter! I’m sure you’ll be a success

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Peter Renton March 4, 2014 at 3:31 pm

Thanks RawRaw. Success is certainly not assured but we will be working hard to make it happen.

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Chris March 4, 2014 at 3:23 pm

Wow! Congratulations Peter! What does this mean for the blogging/news/podcast nature of the website?

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Peter Renton March 4, 2014 at 4:47 pm

Thanks Chris. It is has been a long road as I am sure you can imagine but it feels great to get this over the starting line.

The nature of Lend Academy will remain the same. I will still be writing content, covering news developments exactly as before. But now, my new partners, Jason and Bo, will also be contributors so readers will be getting more than one perspective from now on.

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B. Mason March 4, 2014 at 9:30 pm

Congrats on the excellent news. I’m sure there’s a lot of hard work ahead, but it’s good to know that you’ll enjoy it. May the money tree flower!

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Peter Renton March 5, 2014 at 6:51 am

Thanks Bryce. Yes, the work has only just begun. But as you can appreciate it takes a lot of work just to get to the starting line.

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Sean Murray March 5, 2014 at 12:25 pm

Funding Circle USA is small business oriented if I’m not mistaken. It’s an entirely different type of risk. Have you invested in Funding Circle’s loans already? Have you found it to be a different experience than investing in consumer loans?

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Peter Renton March 5, 2014 at 10:19 pm

Hi Sean, Yes, Funding Circle USA is a small business lending platform and it is very true that this requires an entirely different skill set when it comes to measuring risk. On the Lend Academy Investments team we have people who have experience in both the consumer and small business side of underwriting – and these people will be helping us with our investment decisions.

And no, I have not personally invested in Funding Circle yet. My only small business lending investment is through Brendan Ross’s Direct Lending Investments fund.

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Neal S March 6, 2014 at 12:28 pm

So, Peter, you have gone to the “dark side”! We still love you anyway!

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Peter Renton March 6, 2014 at 4:26 pm

Thanks Neal. Yes, I know some of you will consider this the dark side. But I am not abandoning my fellow individual investors. Far from it. Just trying to give people more options.

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Jilliene Helman March 7, 2014 at 12:18 am

Congrats, Peter! An amazing evolution and I can only begin to imagine how many clients you will benefit. You’ve been an inspiration for me personally in the P2P world and I wish you and the team amazing things with this new endeavor.

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Peter Renton March 7, 2014 at 5:05 am

Thanks Jilliene, I am blushing… So nice of you to chime in.

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Jerry B March 7, 2014 at 9:54 am

Good luck Peter, however I am very disappointed that the P2P fund has such a large minimum. Do you see anything in the future with lower minimums and high yields?

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Peter Renton March 8, 2014 at 12:34 pm

Thanks Jerry. And I am also disappointed with the high minimums but the economics don’t work for smaller amounts. Having said that, we are not promoting this fact but we taking on a limited number of investors for less than $250K. The catch is there is a one-time fee of 2%.

Whenever I talk about this now our lawyer wants me to say this:
This does not constitute an offer of securities, and anyone interested should inform themselves of the risks inherent in investments such as this.

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Greg Campbell March 7, 2014 at 10:02 am

congratulations Peter. This is a natural evolution that I believe will help accelerate the interest and growth of the sector. I hope to see the fund expand beyond the US to incorporate the rapidly developing P2P market internationally.

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Peter Renton March 8, 2014 at 12:36 pm

Thanks Greg. The international platforms are certainly on our radar. We hope to move outside the US with our investment offerings some time next year.

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Aaron Hill March 7, 2014 at 10:22 am

That’s what we are looking for! That excites us!

“Readers will be getting more than one perspective from now on.”

“Just trying to give people more options.”

“You look to take the P2P space to another level.”

Looking forward, Peter and the Lend Academy!

To the prosperity!

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Peter Renton March 8, 2014 at 12:36 pm

Thanks Aaron!

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James March 7, 2014 at 11:04 am

Peter,

I’m a big fan of what you are doing and the P2P movement. I wish you success and agree that this is a great move for you and the industry. Thank you for your service.

For those of us that are not 1%ers, not “accredited investors”, diversity is just as, if not more, important. The P2P Fund provides both diversity across platforms and a significantly higher rate of return that we will not have access to. I do understand that when dealing with larger accounts, some costs will go down as the number of clients that need to be serviced is lower. However, I think you should consider something like the P2P Fund for us middle class folks with the diversity from the 3 different loan originators and a target of around 9%. I’ve been picking loans by hand so far, but it is getting harder. As the world pays more attention to this lending model, I fear that scrappy DIY middle class folks are going to get increasingly squeezed out.

James Wood

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Peter Renton March 8, 2014 at 12:39 pm

Hi James, I totally agree that diversification is important for all investors. And one of our goals is to offer the broadest diversification of any company in this industry. We have to start somewhere and we are starting with LC, Prosper and Funding Circle for our fund and Prosper for our SMA product. But we will be expanding on these offerings as soon as we can.

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James March 8, 2014 at 1:01 pm

Thanks for addressing my concerns Peter. In the mean time, following your advice and my own back testing, I’ll continue as a self guided investor running my own models. Right now I’m self employed and have the time to do this as well as log on at odd times of the day to snatch up the best of the new releases. A lot of people can’t easily do that so moving toward a platform diverse fund with a strong rate of return for retail investors is a goal that I hope you can reach down the road. Thanks for all the good work.

James

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Peter Renton March 8, 2014 at 1:42 pm

For regular Lend Academy readers who have the time and the desire to do their own investing I don’t think our investment offerings are a great fit. You can do it yourself and avoid our management fee. We just want to offer the best product possible for those investors who want someone else to do it for them.

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Marsha F. March 8, 2014 at 12:02 am

Hi Peter,
We were excited when we heard about your new endeavor until we saw the minimum and accredited investor status required. Really ? People who can afford to drop a min. $250k on P2P don’t need the help. As James puts it – we middle class folk are the ones who need the help. Right now the institutional investors and big money are making it hard to get good loans on Prosper. They are slurping up everything in sight, leaving us with the leftovers. Prosper is allowing people who have 100+ deliquencies to apply for loans and approving them! Do they really think someone with that history is going to pay it back ?! We can’t even invest in LC due to the state we live in. I love P2P and people helping people, but I fear it won’t be around much longer with the corruption that comes with companies who can buy and control everything.

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Peter Renton March 8, 2014 at 12:57 pm

Hi Marsha, I hear you and I would love to offer a $1,000 minimum investment for everyone. But if we did that we would be out of business very quickly. We are trying to help as many people as possible and if you are patient with me and stay tuned you will see more offerings down the road.

As for your comment on p2p, I completely disagree that it will not be around much longer. I see no corruption in this industry whatsoever, it is far more transparent than any other investment I can think of. While it certainly is evolving, I see a place for the small investor for a long time to come.

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ga March 8, 2014 at 7:46 am

hmmm.

I agree with above comments. I believe you’re intentions are good Peter, but the unintended consequences may push out us smaller investors.

This will certainly help line the pockets of big investors, but create challenges for the rest of us. It’s just another form of an institutional investor in my opinion. Maybe it is inevitable anyway.

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Peter Renton March 8, 2014 at 12:59 pm

The platforms are putting strict limits on institutional investors, including us, in order to protect their smaller investors. As the industry grows I think we will continue to see both small and large investors participate.

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Glenn March 9, 2014 at 11:57 pm

Congratulations Peter!

All the best!

Glenn

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SM March 23, 2014 at 2:07 pm

One of the challenges I face with P2P is taxes (high income tax rates and limited opportunities for the capital losses of dud loans). Would the fund represent a way around this challenge? That is, would gains be treated as income or capital gains?

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