Introducing LendingRobot’s “Adaptive Portfolio Rebalancing” Feature

Our new Adaptive Portfolio Rebalancing (AdPR) feature is designed to improve investor returns on Lending Club by automatically buying and selling notes in order to increase a portfolio’s return. AdPR does this by:

  • Constantly putting all the notes for sale on the secondary market. The sale price is calculated such that the net proceeds would be higher than the expected return when keeping the note, taking into account its overall probability of default, status (e.g. number of days late), maturity, and probability of early repayment.
  • Continuously trying to buy ‘cheap’ notes on the secondary market. ‘Cheap’ means that considering its asking price, a note is likely to generate an expected return significantly above market average (here again, taking into account overall probability of default, status, maturity, etc…). At launch, we determined ‘significantly above market average’ to be more than 6% for conservative loans and 14% for aggressive ones.

AdPR is a premium feature available for “Fully Automated” Lending Club accounts with at least $20k in managed principal and access to the secondary market.

To utilize this new feature, clients can simply check one or both of the boxes now available in the “Strategy” section of your dashboard. Once checked, AdPR will be enabled as soon as LendingRobot is managing over $20,000 on their account. All AdPR activity is matched to your overall investment strategy.

LR AdPR

New clients are opted into AdPR by default, and have the option to opt-out on the investment strategy page. After a LendingRobot account is created and the investment strategy is set using the simple “aggressive” to “conservative” slider, new clients have the option to opt-out of either automatic secondary market buying or selling by unchecking the appropriate boxes below the slider.

Notes bought on the primary or secondary market are clearly distinguished on the website, in the client dashboard, and in the daily activity email.

11 Comments

  1. Brendan says:

    Hello,
    This new feature looks very promising! Any idea when something similar may be ported over to Prosper accounts?
    Thanks!

    1. Vanessa Hoying Vanessa Hoying says:

      Hello Brendan, every time we’ve visited Prosper, this is something we push for, since we would prefer parity between the two platforms. We’ve been informed that the secondary market is not currently a priority for their platform at this time.

  2. jj says:

    Will the primary and secondary market be weighted equally when reinvesting available cash?

    1. There is not a target portfolio weight between primary and secondary market purchases.

  3. Lucas says:

    Great feature, before I can sit back and relax – one question on the buying on the secondary market. If there is a loan with expected return of 12% and it is on sale with a pricing that yields an expected return of 13%, will the robot buy it? Just didn’t understand this spread very well (for aggressive loans).

    1. Exactly, yes. If LendingRobot’s expected return for a note indicates that it is underpriced (and it matches the client’s risk tolerance) the note will be purchased automatically.

  4. Don says:

    This could possibly be the biggest news since LendingRobot was formed. I’ll start using it as soon as I can confirm with LendingClub that their new processes to download transactions to TurboTax to simplify tax reporting will also work with secondary market purchases and sales. Do you know of a resource on the LendingClub website that might confirm whether this is the case?

    1. Vanessa Hoying Vanessa Hoying says:

      Hi Don, thanks for the feedback! In regards to your question about a resource for Lending Club’s usage of TurboTax click here: Lending Club and TurboTax. Hope it helps.

  5. Josef says:

    Will AdPR be enabled as soon as LendingRobot is managing over $20,000 on the Lendingclub account or $20,000 on the Lendingclub and Prosper account combined?

    1. Vanessa Hoying Vanessa Hoying says:

      AdPR will be enabled once LendingRobot is managing $20,000, total. We take into account your entire LendingRobot account managed by us.

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