LendingClub re-introduces Prime
This week, LendingClub re-introduced its Prime program. No doubt it will be welcome, as many investors have been complaining about how time consuming it has become to select loans on LendingClub.
LendingClub Prime is designed to automatically invest based on a pre-defined asset-allocation or a saved filter.
Who is Prime good for? People that want to invest in peer lending but don’t have the time to constantly select loans.
Who is Prime not good for? Anybody who wants to aggressively pursue the loans that provide the highest returns, and to never leave idle cash in their accounts.
It is no coincidence that investing in LendingClub has become so hard for individual investors. Peer lending’s increasing popularity has attracted big money, who are using advanced technology and analysis to snatch up the best loans seconds after they are made available – essentially crowding out individual investors.
Unfortunately, Prime will not help individual investors who try to compete against Hedge Funds and invest in the best loans as LendingClub makes very clear: “If you place orders more frequently than once per week, the PRIME service may not be for you… If your investment strategy includes the use of multiple filters, the PRIME service may not be for you.”
And why is that? Well, ironically, it is because LendingClub is doing the right thing. LendingClub is a marketplace – and as such, it should ensure transparency and fairness, and not be in the business of picking winners or providing unfair advantage to some of its users. Stock market investors don’t ask NASDAQ and NYSE to help them game other investors – they rely on brokers for fast execution. One can view LendingClub as NASDAQ for Peer Lending.
Its is very commendable for LendingClub to show such stewardship, and display once again a very google-like ‘do no evil’ approach. Here is an overview of the restrictions LendingClub put on Prime (for more details see LendingClub):
- Prime investments are attempted once a day; for any single investor, Prime tries to invest at least once per week (while loans are released four times a day).
- LendingClub will not fund the last dollars available in any loan, to make sure that non-Prime investors are not crowded out.
- LendingClub allocates investments to Prime investors based on the ratio of idle cash to portfolio size; so if someone has \$2000 idle in her \$50,000 account, she will wait behind an investor with \$2000 idle cash in a \$5,000 account.
- Prime lets investors use filters, but not combine them in a prioritized strategy: they can’t have strategy that says “invest in loans for credit-card refinancing with grades D-F, and then if there is still money left invest in loans for debt consolidation with grades C-E, …”.
What are the options left for investors who want to aggressively pursue the loans with higher returns?
Rich folks can invest in a hedge fund that specializes in peer-lending. Those who are not there yet, or simply don’t like hedge fund fees – can use LendingRobot.
We created and designed LendingRobot to be the “hedge-fund in a box” – whether people invest \$300,000 or \$3,000 a year. It can be as aggressive as a hedge fund in investing in the best loans:
- LendingRobot submits investment orders seconds after new loans are made available. It does so four times a day, seven days a week.
- It allows to combine a number of filters, applying a strategy of “invest in this, and any money left in this, …”.
- It allows a “follow the hedge funds” strategy for those who don’t want to do their own research: LendingRobot tracks within seconds which loans are the most popular (getting the highest funding ), and can automatically invest in them (as in “invest in any D to F loans in the top 10% of popular loans”).
- LendingRobot will try to invest as much and as fast as possible, according to the filters defined by each user.
To sum it up, LendingClub is doing the right thing by offering a less time-consuming way to invest, while not giving anyone an unfair advantage; while more aggressive investors shall rely on tools like LendingRobot to compete with Big Money and get access to the best loans.
- Alex Neporozhniy
- December 7, 2013
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