What are the best annual ROR that people achived on LC?

[MathGuy]

I have a 2 accounts in LC and apply different strategies to each in a hope to keep the strategy that works best.
So far the better performing account in LC has an adjusted net annualized return of 21.59% with a weighted average interest rate of 19.92% with 1341 loans.  The weighted average age of the account is 3.5 months so I expect the adjusted net annualized return of 21.59% to go down.   Soon I will deplete all the cash cash that is sitting in the account, once I do that, I will mark that day as a starting day and will measure the account value a year later to calculate annal ROR. Of course I will not add money to the account.  In this account I don't keep late notes or late at one point notes, I sell them at a discount until I get rid of them.  As of this moment I have 2 notes IGP for sale
There are plenty of strategies to try, I was wondering what are the highest annual rate of returns investors were able to achieve on LC. I know its not that simple to measure but a rough idea...

[yojoakak]

ROR = Return on Revenue?

[MathGuy]

ROR = Rate of Return

[AnilG]

Lending Club Investor Performance

https://www.lendingclub.com/info/statistics-performance.action

[Fee]

ROR is a better measure. My NAR is over 15% even though my account value is lower than when I deposited. It seems to be due to the way LC amortizes premiums over the life of the notes.

[Fred]

ROR = Rate of Return

Formula, please?

ROR = (interests_received + outstanding_principal)/initial_principal - 1?

Does it exclude fees?  What to do if sold on Folio? If bought from Folio? Exclude the time factor?

[Fee]

ROR = Rate of Return

Formula, please?

ROR = (interests_received + outstanding_principal)/initial_principal - 1?

Does it exclude fees?  What to do if sold on Folio? If bought from Folio? Exclude the time factor?

In my mind it's as simple as (final account value - initial account value)/initial account value over whatever time period you want.

[MathGuy]

I calculate Rate or Return as follows = ((Current Account Value)/(Investment Amount))^(365/Days Account Open) -1

So for example suppose I invested 45000 and after 6 months I have 49000 in my account all notes are current and never late my annual ROR is (49000/45000)(365/180)-1 = 18.85%  of course the formula incorporate the implicit assumption that I will be able to duplicate the same return for the reminder of the annual period in this case the rest of the 185 days.

I can use Current Account Value correctly in this formula since all my notes are current and never late (If you have notes that are late or were late at one point you need to adjust the Current Account Value by the appropriate discount factors -- and this is very complex to estimate correctly. LC estimates in my opinion are not informative because if you invest more heavily in riskier notes your losses are likely higher than LC (They assume you invest in every note equal amount) also LC only measure 9 months Loss Recovery etc...)

I make the implicit assumption that I can sell all my notes at par*1.01 should I need to liquidate my account.  Selling all my notes at par*1.01 is equal to the Current Account Value.   Since I don't have any late or late at some point notes I am able at a glance to measure the account performance. 

There is no adjustment in LC for notes that are current but were late at one points these should also be discounted not just the late notes. 

I have attached the "Understanding Your Returns" page with my account performance and custom the graph to match my portfolio.

[TonySaunders]

...an adjusted net annualized return of 21.59% with a weighted average interest rate of 19.92% with 1341 loans

So, what you are saying is that the interest rate is 19.92% but you are somehow earning 21.59%.

Perhaps my understanding of what those numbers mean is wrong?

[MathGuy]

...an adjusted net annualized return of 21.59% with a weighted average interest rate of 19.92% with 1341 loans

So, what you are saying is that the interest rate is 19.92% but you are somehow earning 21.59%.

Perhaps my understanding of what those numbers mean is wrong?

If you look at the attachment I provides from LC website on previous post,  it is not what I say but as per LC website when they analyzes the portfolio performance.  When I do my own ROR calculation I get numbers close to LC and my return is higher than the weighted average of my account.
I guess it is due to the fact that I buy some notes and sell them after a month or two at a 7.0% premium or so.
For example I purchase 2 Loans (see attached) at 25 dollars paying 19.99% interest rate and after they
made one payment their credit score went from 720 to 815. This is a good indication that the borrower took the funds and close his/her cc debt and caused the credit score to shot up fast! This note should sell at a high premium now since it is very low risk given the interest rate of 19.99%) I was able to sell them at 26.64 so the 
annual return on these 2 notes ((26.64+.61)*.99)^(365/45) -1 = 185% (the period return is 7.91%  (26.64+.61)*.99/25 but I was able to get it in 45 days) It took me a long time to be able to better pick loans that are good candidates to behave so in the future.  I am able to do it on a very low subset of my notes but it pushes the return higher than the effective weighted average and compensate me for selling notes in Grace Period at a loss. 
I used to spend many hours looking at notes, risk profile, many pivot table experiments in excel etc... but now I am able to spend on average 30 min per day on LC no more, I guess some people think this is also too much.

[rawraw]

Not to be a Debby downer, but I doubt your returns will continue to look that way.  3.5 months is a really young portfolio and over the years bloggers always thought they figured out a way to beat the system, but then they reverted to the mean more or less.  But I think Core probably has the best ROR at over 100%.   Measuring returns gets tricky and I prefer to just compare NARs.  LendingClub used to give percentile ranks a lonngggg time ago and I wish they still did.  I've held a ROR of roughly 11-12% with a fairly conservative portfolio mix so far, but I think the downward revision on interest rates is starting to hit me.  I've also started investing heavily in A/Bs to get my mix back to a level that fits my risk tolerance for adverse economic conditions.

[MathGuy]

Not to be a Debby downer, but I doubt your returns will continue to look that way.  3.5 months is a really young portfolio and over the years bloggers always thought they figured out a way to beat the system, but then they reverted to the mean more or less.  But I think Core probably has the best ROR at over 100%.   Measuring returns gets tricky and I prefer to just compare NARs.  LendingClub used to give percentile ranks a lonngggg time ago and I wish they still did.  I've held a ROR of roughly 11-12% with a fairly conservative portfolio mix so far, but I think the downward revision on interest rates is starting to hit me.  I've also started investing heavily in A/Bs to get my mix back to a level that fits my risk tolerance for adverse economic conditions.

Any comments or criticism are welcome.  3.5 is the weighted average of my notes not the time the account is open.  I have had the account for almost a year now.  I get rid of many notes in my account if I perceived that the risk is higher relative to the reward and purchase new notes.  This keeps the age of the portfolio young.

The problem with LC is that if you buy notes on Folio at high discount (notes that are late or were late at one point) and you look at how much you invested versus your unadjusted account value you would think you are the greatest investor on earth.  Also if your adjustment for future defaults are wrong your rate of return would be way off.  That's why I never keep any late or late at one point notes in my account because I am not comfortable with the value of the account.  Say 20% of your notes were late at one point their future default is high buy how high?

It is very hard for me to believe that someone can have north of 100% ROR on LC.  So lets say 10,000 is invested on 1/1/2015 in LC do you mean that by 12/31/2015 the account will show a balance of 20,000 after adjustments for late notes defaults?

I really doubt that, but may be wrong.  If someone can do that he/she has my ultimate respect!

[lascott]

I use this customized "Adjustments for Past-Due Notes" to try to be conservative with the ANAR. Good tip I got from others (perhaps a blog).

https://www.lendingclub.com/account/investorReturnsAdjustments.action


http://i.imgur.com/AIEbiyN.png

[rawraw]

Any comments or criticism are welcome.  3.5 is the weighted average of my notes not the time the account is open.  I have had the account for almost a year now.  I get rid of many notes in my account if I perceived that the risk is higher relative to the reward and purchase new notes.  This keeps the age of the portfolio young.

The problem with LC is that if you buy notes on Folio at high discount (notes that are late or were late at one point) and you look at how much you invested versus your unadjusted account value you would think you are the greatest investor on earth.  Also if your adjustment for future defaults are wrong your rate of return would be way off.  That's why I never keep any late or late at one point notes in my account because I am not comfortable with the value of the account.  Say 20% of your notes were late at one point their future default is high buy how high?

It is very hard for me to believe that someone can have north of 100% ROR on LC.  So lets say 10,000 is invested on 1/1/2015 in LC do you mean that by 12/31/2015 the account will show a balance of 20,000 after adjustments for late notes defaults?

I really doubt that, but may be wrong.  If someone can do that he/she has my ultimate respect!

He does it and has provided sufficient proof that I don't think anyone questions it, but he also ends up on LC's radar quite a bit.  Adjustment for future defaults and all that jazz seem to exist outside of your universe of ROR calculations.   He doesn't hold notes long and its easy to compare purchase price versus sold price.

It doesn't matter how old your account is, but how old the notes are.  The reason being that defaults don't occur in the first month and losses will continually rise through the life of notes.  It's just a function of how it works.  Now Folio strategies complicate that a little and I use Folio strategies to reduce my losses somewhat.  But the rule generally holds true.

It also seems common people have an aversion to late notes on this forum and will sell on Folio.  Some sell for pennies on the dollar and behaviors like this probably contributes to Core's success.  Yes, notes that have been late probably have a higher likelihood of problems.  But what is the exact percentage?  Without knowing that, you could be selling and getting a worse outcome than if you just held it. My primary NAR is 11.xx% and my traded NAR is 9.xx%.  But a lot of people will have a primary NAR of 16.xx% and a traded NAR of (x.xx%).

[MathGuy]

Any comments or criticism are welcome.  3.5 is the weighted average of my notes not the time the account is open.  I have had the account for almost a year now.  I get rid of many notes in my account if I perceived that the risk is higher relative to the reward and purchase new notes.  This keeps the age of the portfolio young.

The problem with LC is that if you buy notes on Folio at high discount (notes that are late or were late at one point) and you look at how much you invested versus your unadjusted account value you would think you are the greatest investor on earth.  Also if your adjustment for future defaults are wrong your rate of return would be way off.  That's why I never keep any late or late at one point notes in my account because I am not comfortable with the value of the account.  Say 20% of your notes were late at one point their future default is high buy how high?

It is very hard for me to believe that someone can have north of 100% ROR on LC.  So lets say 10,000 is invested on 1/1/2015 in LC do you mean that by 12/31/2015 the account will show a balance of 20,000 after adjustments for late notes defaults?

I really doubt that, but may be wrong.  If someone can do that he/she has my ultimate respect!

He does it and has provided sufficient proof that I don't think anyone questions it, but he also ends up on LC's radar quite a bit.  Adjustment for future defaults and all that jazz seem to exist outside of your universe of ROR calculations.   He doesn't hold notes long and its easy to compare purchase price versus sold price.

It doesn't matter how old your account is, but how old the notes are.  The reason being that defaults don't occur in the first month and losses will continually rise through the life of notes.  It's just a function of how it works.  Now Folio strategies complicate that a little and I use Folio strategies to reduce my losses somewhat.  But the rule generally holds true.

It also seems common people have an aversion to late notes on this forum and will sell on Folio.  Some sell for pennies on the dollar and behaviors like this probably contributes to Core's success.  Yes, notes that have been late probably have a higher likelihood of problems.  But what is the exact percentage?  Without knowing that, you could be selling and getting a worse outcome than if you just held it. My primary NAR is 11.xx% and my traded NAR is 9.xx%.  But a lot of people will have a primary NAR of 16.xx% and a traded NAR of (x.xx%).

I am happy with my returns but have much more to learn and improve.
Assuming 100K starting investment and being able to duplicate 100%+ ROR for the next 7 years the account value will grow to north of 7 millions and in 19 years the account owner will be the richest person on the planet! Of course as the account grows in value such returns are impossible to sustain!