Many of you have emailed me to ask whether I am still doing these quarterly investment reports. The answer is yes, so here is the latest installment. I have been providing these updates for all my marketplace lending investments since 2011 and I will continue to do so.
Regular readers will notice a significant change with this year’s report. There are several investments that I have decided to discontinue completely so I am separating these out now so everyone can see the returns of all my current investments. But I will still report my overall return for the time being until these investments have been mostly liquidated. I will also be sharing my thoughts on the impact the pandemic will have on this portfolio.
Overall Marketplace Lending Return at 4.93%
My overall returns for the twelve months ending March 31, 2020 was 4.93%. This is down slightly from the 5.12% return last quarter. But what has been quite encouraging is that my LendingClub and Prosper investments continue to improve. Of course, you should keep in mind that these returns are through March 31 so we have seen very little impact of the pandemic. I don’t expect these improvements to continue.
Now on to the numbers. Click the table below to see it at full size.
As you look at the above table you should take note of the following points:
- All the account totals and interest numbers are taken from my monthly statements that I download each month.
- The Net Interest column is the total interest earned plus late fees and recoveries less charge-offs.
- The XIRR ROI column shows my real world return for the trailing 12 months (TTM). I believe the XIRR method is the best way for individual investors to determine their actual return.
- Investments that I am liquidating have been separated into the bottom section of the table.
- I do not take into account the impact of taxes.
Now, I will break down each of my current investments from the above table grouped by company.
As I said in the introduction LendingClub has improved their returns dramatically since the dark days of 2017 where some of my accounts dipped into a negative return on a TTM basis. Improvements made back then have really been paying dividends. Of course, with the pandemic we don’t expect these returns to continue but so far the consumer is holding up reasonably well. The above screenshot is of my largest LendingClub account that was opened in 2010 with around $53,000, with all payments reinvested since that time. You can see that there is over $2,000 in cash sitting in this account because there are fewer loans made available to individual investors and it has become harder to reinvest all the principal and interest payments.
I now only have one Prosper account where I am reinvesting. I have been liquidating my original Prosper taxable account as I focus more of my marketplace lending investments on retirement accounts. My Prosper Roth IRA account has now had six consecutive quarters of at least a 7% return showing consistency in underwriting that will no doubt be tested in the coming months.
I have been invested with real estate platform Peerstreet now for almost five years and have invested a total of just over $18,000. PeerStreet focuses on short term loans – typically 6-24 months with yield to investors in the mid to high single digits. I like the $1,000 minimum per investment at PeerStreet which has enabled me to feel comfortable starting with a relatively small investment. I have cycled through my initial capital several times already as the payback on many of these loans ends up being less than 6 months.
While small business lending platform Streetshares has been my top performer for many years I am cashing out part of this investment as I am concerned about the state of small business due to the pandemic. While I think they run a great platform there are millions of small businesses that are hurting right now and I am reducing my exposure to this asset class. But I do intend to maintain a portion of this investment so I am not including it in my runoff list.
The Money360 fund is focused on commercial property. The fund invests primarily in bridge loans in the $3 million to $30 million range for commercial buildings across a variety of property types: office, retail, self storage, hospitality, industrial, multi family, manufactured housing and special purpose. These are 12-month to 36-month loans with an LTV of less than 75% and broad geographic diversification. I am watching this investment closely as the situation in commercial real estate is fluid right now.
YieldStreet provides access to unique investments that have traditionally not been available to individual investors. I have invested in such esoteric investments as two container vessel deconstructions, other marine financing for large vessels as well as an art portfolio. These are not the kinds of investments I have seen anywhere else. While some of their marine investments are having challenges right now they continue to offer a range of unique investments. They also offer the YieldStreet Wallet, which until recently was earning good interest but it is now at basically zero so I withdrew my cash there. The minimum investment is usually $10,000 for these investments and while I am still interested in new offerings their pipeline has certainly slowed since the beginning of the pandemic.
Fundrise is a real estate platform focused on the individual non-accredited investor. I opened up my account there almost five years ago and I continue to be impressed with their consistent returns. I am invested in their Income eREIT fund which is currently invested in 17 projects, primarily multi-family home construction. REITs are having a tough time right now and so I have decided to trim my holdings here due to the pandemic.
Cadence is the first new entrant in my portfolio for some time. But I have been watching them closely since they launched and decided to make a small investment last year. I have since doubled that original investment as I have been impressed with what they are doing. Like YieldStreet these are esoteric, high yield investments and they have a much lower minimum investment, just $500. I have invested in solar financing, motorsports, asset-backed crypto lending and several international deals that I see nowhere else. These deals often pay over 10% interest so I am under no illusions here, these are not low risk investments.
This quarter I have separated out the investments that I am in the process of liquidating. I did this because I want to track my active investments more closely as I am no longer reinvesting in any of these runoff investments. I started liquidating my taxable LendingClub and Prosper accounts back in 2018. I discussed the liquidation of my Lend Academy P2P Fund holdings last quarter as we are closing down the fund.
I have also decided to liquidate my P2Bi holdings. The platform has had no new opportunities for investors since last year and given its small business focus I decided to move this money into cash. These are short term loans so the liquidation period here will be quick. Finally, I am also liquidating my AlphaFlow investments but this is not because I am unhappy, instead this is because they have closed down their platform for retails investors.
My marketplace lending portfolio is going to be undergoing quite the transformation over the rest of the year. I am moving most of this money to cash as I wait on the sidelines to see how the different platforms perform in what could well be the most severe economic downturn since the Great Depression. With so much unknown it is difficult to make new investment decisions today. Small business lending is clearly going to be impacted and depending on any future stimulus the consumer may be impacted as well.
I am happy to keep reinvesting in my current investments but I am watching everything closely and that could change. I am adding new money cautiously as I feel in no hurry to step back into the market. As an observer and enthusiast the next 12 months will be the most interesting in the history of the marketplace lending industry. One thing that is likely, there will be lots of changes happening and some platforms are probably not going to make it.
Finally, I like to end with the one number I track most closely and that is my Net Interest number. This is the money that my portfolio actually earned in the past year (at least on paper) and at $37,955 it is down from last quarter but still a respectable showing.
As always, feel free to chime in with your thoughts in the comments section below.