Regular readers know that this is one the most popular features on Lend Academy. I have been sharing my detailed quarterly returns with readers since 2011 and I will continue to do so for the foreseeable future. I know investors are most interested in returns, in particular how they have been trending over time. You can go back and look at the breakdown of my investments every quarter for the past five years.
Overall P2P Lending Return at 8.07%
The good news, if there was any this past quarter, is that my declining returns have stabilized somewhat. My overall trailing twelve month (TTM) return in Q4 2016 was 8.07% compared to 8.21% in Q3 2016. I am taking this as good news because in every quarter for the previous one and a half years my returns had dropped 0.5% or more. Comparing the year ago quarter the picture is still not pretty – my TTM return in Q4 2015 was 9.85% so I am down almost 2% since then.
I have been thinking for some time that my returns have just about reached bottom but now I am not so sure. The reality is that Q4 was the worst quarter I have ever had if you look at it in isolation. Just taking a look at my six mature Lending Club and Prosper accounts the TTM return for those accounts was 6.75%, but the annualized return just for Q4 was just 5.3%. And if you look at my main Lending Club account that was opened in 2009 the numbers were even worse – the annualized Q4 return on that account was just 2.1%.
Overall my defaults in Q4 were the highest they have ever been. Several of my Lending Club accounts had negative months where the charge-offs were more than the total interest earned. December seemed to be a little better and January was also decent so I am hoping the worst is behind us. We are all paying for the mistakes made by Lending Club and Prosper in 2015 as they clearly mispriced many of their loans, particularly those in the higher risk loan grades where my portfolio is focused. They have since increased interest rates and tightened underwriting considerably so we should see better results from 2016 and 2017 vintages. But the reality is I still have many loans in my portfolio from 2015 that are late and will eventually default.
If you are interested in more analysis of the Lending Club and Prosper loans issued in 2015 you should read this excellent analysis done by Ryan recently.
Now on to the details. Click the table below to see it at full size.