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Lending Club Attracts Their Largest Investor Ever

by Peter Renton on September 8, 2011

Today Lending Club announced a big new investor on their platform. Peter J. Thomson, a director at Thomson Reuters and chairman of Thomvest, an early stage VC firm, has made a $25 million commitment to Lending Club.

According to the article on Bloomberg this is the largest commitment ever by an individual or institution in Lending Club.

Peter Thomson, director of Thomson Reuters Corp. (TRI), is investing in some of LendingClub’s top-rated loans that mature in 36 months, he said in an e-mailed statement. Thomson will invest a total of $25 million, said two people familiar with the matter, who declined to be named because the amount is private.

There is an official press release that states Thomson’s company Thomvest will also take an equity position in Lending Club. It is not clear how much this position is and whether it is included in or in addition to the $25 million amount. We will be able to find out in the next couple of weeks when the SEC regulatory filings are made public.

LC Advisors P2P Lending Funds

What is also interesting to me in this press release is that it is the first public acknowledgement by Lending Club of the existence of their funds run by LC Advisors (a wholly owned subsidiary of Lending Club). These are private funds setup for high net worth individuals and institutional investors as a vehicle to invest in Lending Club notes.

My understanding of LC Advisors is that they run two funds. One is a general fund that invests across all loan grades and the other is a conservative fund that invests just in A and B grade notes. This latter fund, called the Conservative Consumer Credit Fund, is what Peter Thomson has chosen to invest in. Both funds are open to accredited investors in all U.S. states but there is a minimum investment of $100,000.

Now, this $25 million pales somewhat when compared to the $150 million commitment made to Prosper earlier this year but it is still a huge win for Lending Club and for p2p lending in general. Lending Club has broad institutional interest and this public commitment will only add to this interest. Coverage on a major site like Bloomberg.com will help drive individual investor interest as well.

I am always happy to hear about these kinds of institutional investments. After record investor inflows last month I wouldn’t be surprised if Lending Club easily surpasses that record this month.

 

 

{ 13 comments… read them below or add one }

Dan B September 8, 2011 at 8:07 am

So over what period of time are we talking about here? So what are the perks of investing through LC Advisors? I’m assuming he gets more than a free iPad?

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LC Joe September 8, 2011 at 8:28 am

I think this investment is over a 5 month period. The advantage of LC Advisors is you have a certain amount of quarterly liquidity. This provides an avenue for large investors and institutional investors to be able to invest without having to lock their money up forever. I am starting to see this trend now at Lending Club where almost all new money is coming from institutions and very rich individuals. I have to wonder if the day is coming where small investors will be excluded.

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Dan B September 8, 2011 at 9:24 am

LC Joe………Based on what info do you claim that “almost all new money is coming from institutions and very rich individuals”. ? What’s your definition of “very rich”?

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Peter Renton September 8, 2011 at 12:34 pm

@Dan, I have no idea what time period we are talking about – your guess is as good as mine here. As I understand it the main perk of investing through LC Advisor is your get a mutual-fund like vehicle for your Lending Club investment. Obviously it is completely hands-off for the investors but they do get a monthly statement with a Net Asset Value similar to other funds. There is some liquidity I have been told but I am not sure exactly how that works. The other perk is that you can invest from any state. Not being an investor in this fund there may be other perks I am not aware of.

@LC Joe, I am also curious as to where you get your information. The latest information I have is that the institutional/private investor is a 50-50 split. And where did you hear about the five month investment period? Please tell.

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LC Joe September 9, 2011 at 9:02 am

@Dan B, The “trend” I mentioned is based on what I see occurring. Three years ago they had 56 million in loans out and I never heard that institutional investors were investing. Now, three years later, with a solid track record at Lending Club, we are seeing it more and more. I hear about this stuff the same way you guys do. Asking questions at Lending Club, looking for news regarding Lending Club, reading the press releases, etc. My feeling is that at this point it is much easier to get $25 million from a very rich individual that it is to get 1250 people to invest 20k. An example of why I feel this way is that although I have told several people about investing at Lending Club not one has been the least bit interested.

My definition of very rich is “someone” who can invest 25 million in “something”. Call me crazy.

@Peter Renton, see above as to where I get my information. If as you say there is a 50/50 split, then my remark about “almost all new money” should be changed to “an increasing percentage of new money invested at Lending Club can probably be attributed to institutional investors and wealthy individuals”. Regarding the five month period for the 25 million please note that in my post I said “I think”. That’s vague because my memory is vague as to why I think that. Beats me. Where do you get your information Peter? Please, do tell.

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Dan B September 9, 2011 at 9:36 am

LC Joe………So what you said previously is just conjecture then. I understand some of your reasoning, though it’s not exactly grounded in fact.
In fact 3 years ago to date Lending Club had only around $19 million in issued loans, a far cry from the $56 million you stated. Keep in mind that 3 years ago they had only been in operation for 15 months, & a number of those months were part of the SEC quiet period.
Oh & incidentally if your definition of “very rich” is the willingness or ability to invest $25 million in it, then I would state that LC has 1 such investor so far. So again I don’t see where you were going with your statements of very rich individuals pouring money in. And for the record, people who have $25 million to throw around into 1 investment have always had options to invest in the unsecured consumer debt category. P2P gives the rest of us a new investment option, but it hardly breaks new ground for the wealthy.

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Charlie H September 9, 2011 at 9:56 am

Last night a learned that some one who is rich is a family that makes a combined 250K a year.

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Peter Renton September 9, 2011 at 11:48 am

@LC Joe, I get a lot my information the same way everyone else does. I read pretty much everything I can find online about Prosper and Lending Club. Being one of the very few p2p lending bloggers I have the added benefit of access to senior managers at Prosper and Lending Club. I have conversations with these people at least monthly and they give me a heads up whenever there is about to be a big announcement.

@Dan, Hedge funds have been investing in consumer credit for decades and I am sure most of them would welcome a $25 million investment. Which is why it is curious that Peter Thomson decided to go the Lending Club route. Of course, this is probably a tiny fraction of their overall portfolio. When the family business can spend $17 billion to buy Reuters, as they did in 2007, their total portfolio may well be in the billions.

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LC Joe September 9, 2011 at 11:52 am

@Dan B, you are correct on all facts (and I was wrong!). I was off by a year in my thinking with the 56 million figure. Still considering the LC Advisor Funds with their $100,000 minimum I feel that the trend I mentioned is there. Conjecture, yes.

Define conjecture:
Noun: An opinion or conclusion formed on the basis of incomplete information.
Verb: Form an opinion or supposition about (something) on the basis of incomplete information.

If the complete information is available I don’t have it. I certainly wasn’t trying to make stuff up though. I was stating an opinion or supposition about (something) on the basis of incomplete information.

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Dan B September 9, 2011 at 3:42 pm

LC Joe……….I appreciate your gracious comments. Regardless of where we stand today time may prove you correct in your assessments of where the bulk of future money will come from.

Peter…………The only advantage/reason that I can see is what you mentioned previously & that is the equity position. I have no information on this but if it turns out to be accurate then I think we can all see this would be more attractive vis a vis a standard investment in consumer credit.

Charlie H………..That’s a good one.

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Peter Renton September 9, 2011 at 4:05 pm

@LC Joe, I don’t think anyone outside a few select people inside Lending Club and Prosper have the complete information. I am quite certain there are things they are not telling me in our conversations.

@Dan, You are probably right. I am still not sure on the equity position that Thomvest has taken but that will be public information soon enough. I will be keeping a close eye on future SEC filings for Lending Club.

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LC Orlando September 20, 2011 at 1:14 pm

I just came across this blog – glad I found it… there are some great P2P discussions here.

I have been investing in the LC since August of 2009 and I am a huge fan. I have never done Prosper so I can not compare the two but I like the LC platform.

As to this discussion, I just got off the phone with my LC acct mgr and he confirmed that Institutional Investors and Retail Investors get access to the same set of notes. To prevent the Institutional money from taking over the system they have controls that prevent hoarding of the “quality notes”. Here was his example (paraphrased): If in SEP 40% of the new money in the platform comes from Institutional Investors they are limited to owning 40% of ANY given note – example, borrower wants $5k the split is $2K Institutional and $3K Retail. He didn’t go into any more detail than that – i.e. the actual mechanics such as if in SEP the lock goes into effect for OCT notes… but the point is clear – they do not want to lock out the retail investors. Assume the retail market dries up like LC Joe is proposing than I still believe we will get a shot.

Peter – keep up the great work, love the site.

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Peter Renton September 20, 2011 at 2:08 pm

@LC Orlando, Thanks for your comment and welcome to the conversation. I had not heard of any hard and fast rules as far as the split between retail and institutional investors so thanks for sharing. It makes sense they would do it this way although if any institutional investor decided to take a hands on approach I imagine this would be difficult to enforce.

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