Yes, per the original post.do you track the frequency of different grades? Like how many 1s, 5s, 10s, you have?
August 2013 Update
Account: $39,996.50
LendingClub Net Annualized Return: 12.1%
Excel XIRR (inc. cash drag): 11.3%
I haven't done such a tally, Rawraw. I suppose I could do such a thing, but it might be difficult because very early on in 2012 I was not keeping the scores around. My feeling is that I am heavily weighted in 10% notes, but that will shift to 5% over the next year.Just curious. A paranoid person may think you are "front running" the model and getting all 1% notes and advertising those returns for all grades. I'm just more curious for an expectation piece -- as your 1's don't stay around very long.
LC Reported Account Value | $40,685 |
Accrued Interest | $440 |
Impaired Loan Write-downs | $1,191 |
Estimated Account Value | $39,934 |
Category | N | $ | % |
Current | 1,045 | 37,961 | 95.0 |
In Grace Period | 13 | 447 | 1.1 |
Late 16+ | 6 | 212 | 0.5 |
Late 31+ | 33 | 1188 | 3.0 |
In Default | 4 | 150 | 0.4 |
Category | N | $ | % |
Prior Year | 40 | $1,731 | 4.2 |
Deposits | None |
Withdrawals | None |
Interest Rate | 17.0% |
Age (unweighted) | 371 days |
Age (weighted) | 329 days |
LendingClub Net Annualized Return | 8.92% |
Excel XIRR (inc. cash drag) | 8.73% |
Have you been able to analyze your late notes to identify any common contributing factor? 4% of the total number of notes, higher if you look at dollars, seems high imho.
(1) I'm in the bottom-most part of the default curve--I suspect the 12-month trailing defaults will smooth out as the portfolio ages.Yea, I think people forget about #2.
(2) Recall that the purpose of P2P-Picks is to make the best portfolio possible with the expected top 10% of all notes. One can certainly design a very tight filter that can outperform, but good luck investing tens of millions with it. I'm trying to design a solid-performing product for what I hope to be thousands of users.Have you been able to analyze your late notes to identify any common contributing factor? 4% of the total number of notes, higher if you look at dollars, seems high imho.
LC Reported Account Value | $41,569 |
Accrued Interest | $440 |
Impaired Loan Write-downs | $540 |
Estimated Account Value | $41,469 |
Category | N | $ | % |
Current | 1,155 | 39,381 | 97.6 |
In Grace Period | 8 | 220 | 0.5 |
Late 16+ | 6 | 188 | 0.5 |
Late 31+ | 16 | 551 | 1.4 |
In Default | 0 | 0 | 0.0 |
Category | N | $ | % |
Prior Year | 70 | $2,760 | 6.8 |
Deposits | None |
Withdrawals | None |
Interest Rate | 17.7% (this was mistakenly reported as 19.7% (edit 10-Jul-14) |
Age (unweighted) | 417 days |
Age (weighted) | 348 days |
LendingClub Net Annualized Return | 9.59% |
Excel XIRR (inc. cash drag) | 9.30% |
We feel accrued interest payable within a month is a current asset.
Do you guys know if they back out the accrued interest on the expected losses? Say you have a bunch of loans 110 days past due, does it still include 100% of their accrued interest?We feel accrued interest payable within a month is a current asset.
Agreed.
In the accrual basis of accounting, we should accrue both revenues and losses.
LC's Adjusted NAR seems to accrue only the losses, making it artificially depressed.
Do you guys know if they back out the accrued interest on the expected losses? Say you have a bunch of loans 110 days past due, does it still include 100% of their accrued interest?
I forgot they didn't include interest in account balances anymore.Do you guys know if they back out the accrued interest on the expected losses? Say you have a bunch of loans 110 days past due, does it still include 100% of their accrued interest?
Lending Club doesn't consider accrued interest in NAR calculations and applies loss factors to outstanding principal only. And this is the way it should be. Accrued interest is never realized until paid.
Can you give any insight to why you are reinvesting into D & E and not C loans?
LC Reported Account Value | $42,905 |
Discounted Accrued Interest | $423 |
Impaired Loan Write-downs | $813 |
Estimated Account Value | $42,515 |
Category | N | $ | % |
Current | 1,211 | 39,099 | 96.4 |
In Grace Period | 15 | 410 | 1.0 |
Late 16+ | 6 | 220 | 0.5 |
Late 31+ | 24 | 766 | 1.9 |
In Default | 2 | 69 | 0.2 |
Category | N | $ | % |
Prior Year | 84 | $3,266 | 8.1 |
Deposits | None |
Withdrawals | None |
Interest Rate (weighted) | 18.1% |
Age (unweighted) | 456 days |
Age (weighted) | 359 days |
LendingClub Net Annualized Return | 9.70% |
Excel XIRR (inc. cash drag) | 9.36% |
It might be fun to have a separate thread of user returns, but I would need to make some guidelines for participation such as knowing whether there were sales, targeting of specific grades, etc. Then we might get a confidence interval of the strategy. However, I suspect my personal portfolio is close to the mean, as it's a random subset of the picks.Have you, either for personal or institutional side, focused any on the management of holdings? Seems your technical expertise could be useful in that arena as well.
Define management of holdings.We get two variables updated monthly and that's the FICO and payment history. Anil has done research to show how these can be used to identify loans with an increased POD. But those risk indicators may be mitigated or amplified by certain traits we know from the original listing. You could also infer at what price would selling while current would be breakeven.
Average Portfolio Description (weighted by remaining principal where noted)
Interest Rate (weighted) 18.1%Age (unweighted) 456 daysAge (weighted) 359 days
I'm trying to see how quickly the "Average Age of Portfolio" changes relative to actual time when someone reinvests all cash principal and interest in a timely manner and does NOT use FolioFN.
How long would you estimate you have been reinvesting the cash in your portfolio to achieve a 456 day unweighted avg age?
Of course. I usually wait until LC comes out with their full stats download for the quarter. That's when I do all my updates, including model revisions, client reports, and my account sharing. It's going to be fairly boring, with a NAR continuing to be around 9.7%. The only crazy thing was cash drag last quarter due to the LC asychronous timing, which thankfully has gone away. Now we are fighting lower interest rates, but I'm still finding enough loans at Top 10% to stay invested.You should consider using Folio strategies. My NAR for an old portfolio is roughly equal to that using LM picks - makes me wonder about your view of the risk/return relationship. I think you may be giving away returns by foregoing Folio activity, but it also makes tracking more burdensome.
LC Reported Account Value | $45,187 |
Discounted Accrued Interest | $394 |
Impaired Loan Write-downs | $1,143 |
Estimated Account Value | $44,438 |
Category | N | $ | % |
Current | 1,360 | 41482 | 95.6 |
In Grace Period | 23 | 608 | 1.4 |
Late 16+ | 4 | 116 | 0.3 |
Late 31+ | 35 | 1061 | 2.4 |
In Default | 5 | 118 | 0.3 |
Category | N | $ | % |
Prior Year | 75 | $2,543 | 5.9 |
Deposits | None |
Withdrawals | None |
Interest Rate | 18.3% |
Age (unweighted) | 493 days |
Age (weighted) | 332 days |
LendingClub Net Annualized Return | 9.77% |
Excel XIRR (inc. cash drag) | 9.32% |
Q4 2014
The big change since last update is that LC has dropped interest rates substantially across all note grades, so even though many of our older (lower interest rate) notes have been repaid and we've invested in higher risk notes, the average interest rate of the portfolio has only increased about 20 bps.
P2P-Picks maintains a hard-coded threshold for the expected returns, so when interest rates drop we naturally pick fewer loans that meet our expected return criteria. Because of this, we had to go from a Top 5% strategy back to a Top 10% strategy in order to stay invested. If rates continue to drop, I will have to evaluate whether I wish to change the definition of what constitutes Top 5% and Top 10%.
Barring external events, we anticipate this level of performance should continue. We are particularly proud of where we show on the "Understanding Your Returns" chart, given that the strategy selects such a large volume of 36 month notes (~5-10% of the platform). In fact, we have maintained our returns in spite of the average age of the portfolio increasing somewhere between 2-3 months on that chart. Thus, we are moving up the ladder in terms of how our strategy compares to other investors.
Balances
LC Reported Account Value $45,187Discounted Accrued Interest $394Impaired Loan Write-downs $1,143Estimated Account Value $44,438
Balances by Distress Level (Not discounted)
Category N $ %Current 1,360 41482 95.6In Grace Period 23 608 1.4Late 16+ 4 116 0.3Late 31+ 35 1061 2.4In Default 5 118 0.3
Charge Offs
Category N $ %Prior Year 75 $2,543 5.9
Transfers
Deposits NoneWithdrawals None
Average Portfolio Description
Interest Rate 18.3%Age (unweighted) 493 daysAge (weighted) 332 days
Returns
LendingClub Net Annualized Return 9.77%Excel XIRR (inc. cash drag) 9.32%
Strategy
- Buy and hold 36-month LendingClub securities - no secondary market activity.
- Initial deployment Top 10% P2P-Picks graded notes.
- ~30% of portfolio is invested under P2P-Picks Profit Maximizer Model v1 (Prior to May 2013).
- Reinvestments using Top 5% P-Max Model v2 (May 2013 onward - more aggressive).
- Reinvestments using D & E graded notes only (March 2014 onward - more aggressive).
- Reinvestments using D & E graded Top 10% notes only (Sept. 2014 onward - less aggressive due to note availability and interest rate cuts).
I can't find on LC's site the page (comparison.png) you showed in this post. Is that because I trade on Folio?I may have misunderstood your questions. I get there from here:
LC Reported Account Value | $46,437 |
Discounted Accrued Interest | $412 |
Impaired Loan Write-downs | $982 |
Estimated Account Value | $45,867 |
Category | N | $ | % |
Current | 1,379 | 42511 | 96.4 |
In Grace Period | 14 | 398 | 0.9 |
Late 16+ | 7 | 173 | 0.4 |
Late 31+ | 32 | 964 | 2.1 |
In Default | 2 | 61 | 0.1 |
Category | N | $ | % |
Prior Year | 81 | $2,665 | 6.0 |
Deposits | None |
Withdrawals | None |
Interest Rate | 18.2% |
Age (unweighted) | 480 days |
Age (weighted) | 313 days |
LendingClub Net Annualized Return | 9.99% |
Excel XIRR (inc. cash drag) | 9.56% |
It will be a long haul to turn over the whole portfolio!
After three and a half years of maximizing returns, I've decided to reduce the risk of the portfolio and invest in A/B grade paper. This is mostly due to my account being taxable. Each year I wind up roughly with enough capital losses to max out my $3k deduction. I do not want to be in a situation where the economy stutters, defaults double, I have to pay taxes on all the interest, I'm stuck with a tax asset I might not use for some time, and the after-tax growth on the portfolio is 0 or negative. The A/B portfolio should have roughly 1% defaults per year in steady state, allowing me to add capital to the account. It will be a long haul to turn over the whole portfolio! Here's the final resting place of the returns: 9.7%. The blue dot's in a good place. Pretty satisfied with that for a buy-and-hold strategy.Bryce, you are so competitive. Now you want to beat me in the conservative realm :) Hope you contribute regularly to the thread below so we can see the transition.
After three and a half years of maximizing returns, I've decided to reduce the risk of the portfolio and invest in A/B grade paper. This is mostly due to my account being taxable. Each year I wind up roughly with enough capital losses to max out my $3k deduction. I do not want to be in a situation where the economy stutters, defaults double, I have to pay taxes on all the interest, I'm stuck with a tax asset I might not use for some time, and the after-tax growth on the portfolio is 0 or negative. The A/B portfolio should have roughly 1% defaults per year in steady state, allowing me to add capital to the account. It will be a long haul to turn over the whole portfolio!Want to consider updating numbers for?
Here's the final resting place of the returns: 9.7%. The blue dot's in a good place. Pretty satisfied with that for a buy-and-hold strategy.
Not really, as I've changed strategies.OK. I realized you changed strategies and thought it would be interesting to see your account during the transition. We could market it "transitioning" your very old portfolio. I suspect others would be as well. I'm pretty careful/conservative with my taxable account as well. I'm at $3,031.55 in losses from Jan-Nov.