Prosper is Hosting a P2P Lending Summit

On Thursday of next week (November 3rd at 5pm Pacific) Prosper is hosting what it is calling a “P2P Lending Performance Measurement Summit”. It will be a webinar that will discuss the need for a performance measurement standard for the p2p lending industry.

Prosper is bringing in the heavy-hitters for this webinar. Attendees will hear from CEO Chris Larsen, EVP of Risk Management Jim Catlin and Chief Investment Officer Joe Toms. Here is what they will be discussing:

1) Consumer credit industry standards for measuring risk performance: the practice of analyzing loan vintages
2) Why Prosper reports Seasoned Returns, and why we think this measure is important
3) How p2p lending investors measure risk vis-à-vis return
4) Call for an industry standard on measuring p2p lending returns, and what Prosper is doing about it

By pure coincidence I will be in San Francisco next week (visiting both Lending Club and Prosper) so I will be attending this webinar in person. Should be interesting – you can sign up for it here.

[Update: Prosper has changed the registration for this webinar – it will now have video and the new registration is here.]

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Tyrel
Tyrel
Oct. 28, 2011 9:30 am

My biggest complaint about how both Lending Club and Prosper calculate our ROI now is that they completely ignore two things: Cash and FolioFN. Some of us buy most of our notes on FolioFN and often pay a discount for them. We also sell some notes on FolioFN at a discount (if they have a history of delinquency) or at a profit (if they’re good notes). But Lending Club and Prosper both ignore this when calculating my return.
Personally I like the way that the XIRR function calculates my return. I studied how it works and wrote my own software to calculate it for me at any point in my Prosper and Lending Club history. But it would be nice of I didn’t have to do this.
The returns that Lending Club and Prosper claim I’m getting are far from my actual returns. For example, Lending Club claims my return is 14.14% when it is actually 8.86%.

Dan B
Dan B
Oct. 28, 2011 11:02 pm

Tyrel…………I’m curious as to why there’s such a large difference between your actual returns & your NAR. Do you often leave cash around uninvested? Have you sold a lot of notes at sharp discounts?

I’ve been with Lending Club for 2 years & buy almost all my notes directly. I do however use Folio extensively to sell & have sold over 400 notes in just the last year at an average net 2% premium. I’ve also bought around 30 notes at an average 2% discount. I do reinvest diligently, on a daily basis. My XIRR calculated returns have varied from 1 to 1.5% above my NAR in the last year. So I’m just curious as to the different experiences we’ve had even though it sounds like we do a a number of the same things.

Tyrel
Tyrel
Oct. 28, 2011 11:23 pm

Dan,

An excellent question. I have limited financial resources to put into Lending Club and Prosper, so I only have about $800 in each right now. I sold a couple of Lending Club notes on FolioFN that were 15-30 days late at significant discounts (50% or so). Since my investment is so small, this made a pretty significant impact on my actual return. However once those notes are sold, according to Lending Club they no longer exist or have any impact on my account, as far as I can tell, as if I’d never even owned them. Thus those losses are not reflected in the NAR they display, but they are are in mine when I use XIRR, and that probably accounts for the biggest part of the difference there.

Additionally, as you suspect, I do end up with a lot of cash around uninvested, relatively. I invest as soon as $25 is available, but that can take several weeks on my account. I probably have an average of $12.50 not invested at any time, which is 1.5% of my total account balance. I imagine this has an impact, but there’s not much I can do about it unless I can transfer in more money or Lending Club allows for smaller initial note purchases.

It’s interesting to think about, by the way, that functions like XIRR could care less what actually happens inside the account: all that matters is what goes in and what comes out (or what the current balance is). It’s very elegant that way.

Chris
Chris
Oct. 31, 2011 3:38 pm

@Dan, would you mind expounding on what you wrote above:

“I do however use Folio extensively to sell & have sold over 400 notes in just the last year at an average net 2% premium.”

This sentence piqued my interest for at least two reasons:
1. Why do you sell so many notes, and at a markup at that?
2. What strategy/criteria to you deploy to successfully sell so many notes at any markup for that matter?

Interesting stuff. Thanks for sharing.