Another P2P Lending Convert from Mainstream Investing

Seeking Alpha is one of the leading websites for news on investing. I have been receiving their stock market alerts and free newsletters for some time. That is why I was very pleased to read this article there earlier this week by Zack Miller, an author, blogger and the managing director at a boutique investment firm.

Now, normally I would just mention this article in my weekly news roundup but I wanted to highlight it in a separate post for a couple of reasons. First, the author provides details of the journey that took him from p2p lending skeptic to convert. Second, Seeking Alpha is the kind of publication that many mainstream investors read who have never even considered p2p lending.

Lower Defaults Than Corporate Bonds

I learned a great deal from this article. I had no idea that default rates were so high on some corporate bonds. High risk corporations appear to default at a much higher rate than even the least creditworthy borrowers at Lending Club or Prosper.

If you’re investing in junk bonds (where there is still a little yield), as time goes by, you have almost 50% chance of getting defaulted on. We haven’t seen, nor are seeing those numbers in the p2p loan market.

Here is the money quote that I hope all investors pay attention to:

So, higher returns, lower defaults. That looks pretty good and may deserve to be a new asset class in your allocation or your clients’ allocations.

Go read the article and send the link to all your friends who are still skeptical about p2p lending.

Peter Renton is the chairman and co-founder of LendIt Fintech, the world’s first and largest digital media and events company focused on fintech.

LendIt Fintech conducts three conferences a year for the leading fintech markets of the USA, Europe, and Latin America. LendIt also provides cutting-edge content all year long via audio, video, and written channels.

Peter has been writing about fintech since 2010 and he is the author and creator of the Fintech One-on-One Podcast, the first and longest-running fintech interview series.

Peter has been interviewed by the Wall Street Journal, Bloomberg, The New York Times, CNBC, CNN, Fortune, NPR, Fox Business News, the Financial Times, and dozens of other publications.

Subscribe
Notify of
3 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
Lou lamoureux
Lou lamoureux
May. 25, 2012 7:24 am

I would have preferred some sort of rate translation between the bonds and P2P. I have no clue what a BB rate bond is issued at, so should I be comparing that to an A rated LC loan or a G? junk bonds may default at A 50% rate, but that might be like a borrower on LC with a FICO of 550 (which we’ll never see).
Lou