If you are a Prosper investor you have probably received an email about it already. If not, then I guess you know about it now. Prosper is hosting a free webinar for investors this Thursday, August 18 at 11am PDT (2pm EDT) to discuss the role of social lending as an investment alternative amid volatile financial markets.
You can read all the details on Prosper’s blog post published earlier today. Two of the top executives at Prosper will be conducting the webinar: Jim Catlin, the Chief Risk Officer and Joseph Toms, the Chief Investment Officer. This will be a unique opportunity for investors to hear from and ask questions of the senior managers at Prosper.
I will be attending this webinar and I hope you will consider it as well. You don’t have to be a Prosper investor to attend. Here is the link to register for it on Gotomeeting.
Perhaps someone should sign up & pretend to be worth-blanket. He/she can then ask the Chief Risk Officer how his 2+ month old account with only 476 notes that have made 1 or 2 payments………….can already have 18 lates. That’s 18 after 2 months! Then when you get some canned BS answer, you can demand hos resignation.
@Dan, I know worth-blanket2 made some very high risk loans right off the bat, so I an not surprised they have so many late loans already. But they have been a but more conservative in recent weeks. Maybe you should ask that question anyway….
I would have asked………if I believed that the answer had a chance of being even a bit illuminating, or had any confidence in it’s truthfulness, or if I had any interest whatsoever in using Prosper as an investment in the future. But since my interest in Prosper is akin to someone who looks out the window while driving past a car wreck, I just don’t see the point. I prefer coming here & throwing the occasional jab at them. You see it’s not that difficult to just tell the truth. 🙂
Well, I’m pretty happy with it, since my returns with average age of about 10 (low considering I just funded a lot of new loans recently) months is 21.21% =) Better than savings/CDs and better than the market right now…
~Shawn
Prosper lender “shawnw2”
Pretty happy? You should be ecstatic. Because as sure as the sun will rise tomorrow, you’re never going to get 21% a year with CDs or 21% a year with the market long term. Then again, no offence but it’s highly unlikely that anyone’s going to get 21% at Prosper long term either so…………………..
@Dan, I wouldn’t write Prosper off just yet. I know you had a negative experience with them, but that doesn’t mean that everyone will. I am also happy with my Prosper investments and I am confident I can get over 15% long term with them.
@Shawn, Congrats on your returns, that is great. I hope you can keep it up, but as Dan pointed out (and I am sure you realize) it will be difficult to sustain 20% returns over the long term. But hey, even if you go down a few percent you are still getting a fantastic return.
Wow Shawn, I’m impressed….
http://www.lendstats.com/lenderlists/lenderlists.php?crit=roi&order=DESC&type=lender&age1=6&age2=&loans1=400&loans2=&lent1=0&lent2=&rem1=0&rem2=&pr2=&pr1=&cg2=&cg1=&roi1=&roi2=&pronly=1
@Ken, I agree. And if you look at just loan portfolios with at least 400 notes and at least nine months old @Shawn is in the top 10 (out of more than 1000 investors):
http://www.lendstats.com/lenderlists/lenderlists.php?crit=roi&order=DESC&type=lender&age1=9&age2=&loans1=400&loans2=&lent1=0&lent2=&rem1=0&rem2=&pr2=&pr1=&cg2=&cg1=&roi1=&roi2=&pronly=0
I’m opposed to this looking back into historical data…………….. but only so far back & then only this or that parameter. If you want to look back, then look back at it all. So when I look back at Prosper I see crap performance overall. Even Shawnw2 performance isn’t really 21%……………it’s 14% overall. And as much as he is outperforming right now, he was also underperforming in the past. So let’s not get too excited.
And as far as looking into the future, what future does Prosper really have? A company that has no prospect of making money in the near or even not near future. A company that is having some serious problems finding new investors &…………. new borrowers, no less. A company with a serious credibility problem. I could go on but I think I’ve made my point.
@Dan, I have an open mind about Prosper’s future. While they are not in as good position financially as Lending Club is right now, they are producing great returns for most investors. And that is what people are looking for after all. I am certainly not going to writing them off any time soon.
So let me ask you a question. Given that underwriting standards changed dramatically after July 2009 in Prosper 2.0 (and the performance of investors confirms this improvement), do you still think we should give as much weight to the performance of loans in Prosper 1.0 as we do in 2.0? Or do you think the changes Prosper made are irrelevant to investors analyzing historical performance?
Peter…….In my first 12 months at Lending Club I had 6 defaults out of 400+/- notes. From month 13 to 21 which is the present, I’ve had zero defaults out of 500+/= notes. Given that my investment methods changed dramatically after the 12th month in DanB 2.0 ( (and my performance confirms this improvement), do you still think we should give as much weight to the performance of loans in DanB 1.0 as we do in 2.0? Do you think it would be fair or a bit disingenuous for me to report DanB 2.0 without also mentioning the results in DanB 1.0?
@Dan, I would like to know about both Dan 1.0 and 2.0 but I would give be more curious about Dan 2.0 with zero defaults and I would want to find out what changed in the 12th month. Then if I felt like this new direction was far better (and repeatable) I would not be as concerned with 1.0 because you have learned a great deal and are a better investor with a better system in Dan 2.0.
@Dan and Peter’s earlier comments… well, yes I am ecstatic, and yes I also realize that returns could go down. Though a point to note is that I think they’ll go down in time when rates start to go down for borrowers, which implies 2 things. First, I believe that it is possible to continue to earn great returns on Prosper and to continue to ‘beat the marketplace’ with low defaults, and second, I believe that Prosper will continue to be a viable and excellent option for time to come. And Peter, the >15% rate is one I was going to mention too for being a highly probably and realistic goal for long term on Prosper. Either way, I think it’s a great option for great returns that aren’t necessarily correlated with the stock market, so not sure why Dan is all Debbie-the-downer on it.
And @Ken and @Peter, thank you, I put a good amount of work and tracking and all to get those numbers and believe they’ll continue to get better for at least awhile, as my delinquencies have actually been dropping.
@Dan, I knew it was only a matter of time until you mentioned the stats regarding Prosper 1.0 and Prosper 2.0. I agree that data is less useful when you nit-pick and try to make it fit assumptions. But that’s hardly what’s being done here. Ignoring the fact that ~15% over 5 years is still pretty good, you have to take into account what is being parsed. If we choose random variables to adjust to get certain ROIs, I’d be with you. But the reincarnation is as clear a line of distinction you can get and a very logical point to refine data. With all the changes from 1.0 to 2.0, it’s hard to compare them at all. And so while it’s useful for my finances to look all the way back, it’s not useful at all to judge my current performance (or anyone’s) or as a predictor of future returns. You can mention the prior returns, but this is a case where it’s useful to eliminate data from the model in order to make it more useful.
And generally I think the negativity towards Prosper is unjustified, and I agree with Peter in that, though they aren’t as sound currently as LC, their future is just as bright and I expect them to turn profitable.
~Shawn
Prosper lender “shawnw2”
Peter………..That’s completely logical. But now what if I were to flip the results around & tell you that I did better during DanB 1.0? That is why I like to look at all the results & not get that excited.
I don’t have to tell you that numbers can be really tricky. Look at Lendstats Prosper numbers for 2010 & so far in 2011. Should investors be alarmed that the ROI for 2011 issued loans are substantially lower than the ones from 2010? I mean it should in fact be the other way round, should it not? I don’t think it’s that alarming mostly because I think there’s a helluva lot of other things to be alarmed at over there, but that’s just me.
Shawn…………Not that you owe anyone any explanations, but I’d be more inclined to believe that your Prosper 2.0 performance so far is sustainable &/or isn’t just an anomaly if you could explain how you have been able to do so much better than average during Prosper 2.0………………….& then explain how you were able to do so much poorer than average during Prosper 1.0.
Correction………..I meant to say,, I don’t think it’s that alarming mostly because I think there’s a helluva lot of other things to be alarmed at over at Prosper, but that’s just me.
@Shawn, People see this 15% number and think we must be crazy, but you and I both know it is certainly possible to get these kind of long term returns on Prosper. Keep up the great work.
@Dan, If you were doing much better in Dan 1.0 then 2.0 then of course, I would be concerned. I would want to know what changed and why it is getting worse. I am not blindly ignoring the negatives at Prosper, I am trying to look at all the facts and draw to my own conclusion. I am sure you are doing the same, we are just coming to different conclusions.
As for the returns this year compared to 2010, I am watching that closely. The downward trend is centered in the D-HR notes but with filtering this downward trend can be mitigated. Having said that if the overall trend continues it will be a concern.
Sure 15% long term is certainly possible, but not probable imo.
As for my Prosper account, I am pleased to say that I’ve sold over 50 notes at an average 1.7% premium in the last 2 months & am down to my last 6. I was pleasantly surprised that I had an easier time than anticipated in unloading them……………..though I have no idea why it takes 5-7 days for notes to “settle” after they are sold at Prosper. Considering that it takes 1-3 days at Lending Club & both platforms are run by Folio, this extra time makes no sense to me.
@Dan, That is an interesting question. Sounds like it has something to do with Prosper’s procedures than Foliofn. Glad you were able to sell the notes at a premium.
After paying the 1% fee there wasn’t much left over, but yes I was real surprised that I was able to sell them at any premium. I was also surprised at how quickly they sold. So at least liquidity doesn’t appear to be a problem currently.
@Dan, That surprises me somewhat, given that Prosper is pulling all their Foliofn investors from the sames states as retail investors (unlike Lending Club). But I am glad to hear it wasn’t that difficult to sell your notes.
Question: Prosper seems to give borrowers of the same average credit quality almost 50% higher interest rate in some cases.
Give that, the returns on Prosper should be higher.
The problem with this is that if you are a borrower, you will look for the option with the lowest interest rate.
So while this higher interest rate is good for the lenders, it hurts loan growth.
If Prosper is going to be profitable it needs to start growing and growing fast.
@Charlie, Prosper uses their own proprietary system to set interest rates. This is based on how similar borrowers performed on their platform previously. I regularly see some 700+ borrowers be allocated to HR status and 660-679 borrowers get a B rating. There are plenty of factors in play other than just credit score.
Judging from the fact that they have raised interest rates on borrowers recently and all the investor incentives in recent weeks I would say that Prosper is more concerned with getting investor money in the door than more borrowers. They still have plenty of loans that don’t fund, unlike Lending Club that seems to fund more than 98% of loans on the platform.
Thanks for the clarification PeterR. I just can’t make heads or tails of how they are pricing there loans.
1: Are some loans not funding because of lack of investors ?
or
2: Are some loans not funding because of the odd pricing causing market distortions.
Some prosper loans fund with in hours, while a fair number never fund.
This tells me that the loans may not be accurately priced from a risk/reward stand point.
@Charlie, Good question. If I had to say I think the major reason is not enough investor funds. Having checked a few of the expired listings this morning I would say that many are not funding due to lack of investors. Take a look at this A-rated loan that only received 48% of its funding:
https://www.prosper.com/invest/listing.aspx?listingID=509531
The loans that fund in hours (or even minutes) are mostly because of big lenders like Worth-blanket2 coming in and funding 60-80% of the loan. With the vast majority of investors only chipping in $25-$50 it takes a Worth-blanket2 to have that kind of an effect. I don’t think it has much to do with these loans being more accurately priced than others.