Personal Portfolio Returns

[rawraw]

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?

[brycemason]

My guess is they discount the interest in the same way as the principal. That's what I did,

[Fred]

Per https://www.lendingclub.com/public/lendersPerformanceHelpPop.action:

Here is the formula for NAR:



And Adjusted NAR:


No Accrued Interest in either one.   The Interest_i is for paid interests from month 1 to now (month N).

[AnilG]

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.

[PeerSocialLending]

Hey Bryce, really enjoy seeing your updates as a majority of my account is filled with your pmax strategy.  Can you give any insight to why you are reinvesting into D & E and not C loans? 

[rawraw]

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.

I forgot they didn't include interest in account balances anymore.

[brycemason]

Can you give any insight to why you are reinvesting into D & E and not C loans?

I just wanted a more aggressive strategy for myself.

[brycemason]

Q2 2014

The key takeaways for this review are (1) our average interest rate has been creeping up as our older B loans (identified by P-Max v1) are repaid and the principal reinvested into D & E loans (from 17.7% in Q1 to 18.1% today) and (2) NAR and XIRR continue to creep upwards.

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% of the platform).

LendingClub's snafu with loan application data caused an outage in our strategy for almost three weeks, thus the stymied originations in "Month 0" in the age chart. We expect originations to be similarly low in months 3 and 4 in next quarter's update. This may have a modest negative impact on our returns due to increased cash drag, but probably nothing major.

Balances

LC Reported Account Value	$42,905
Discounted Accrued Interest	$423
Impaired Loan Write-downs	$813
Estimated Account Value	$42,515

Balances by Distress Level (Not discounted)

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

Charge Offs

Category	N	$	%
Prior Year	84	$3,266	8.1

Transfers

Deposits	None
Withdrawals	None

Average Portfolio Description (weighted by remaining principal where noted)

Interest Rate (weighted)	18.1%
Age (unweighted)	456 days
Age (weighted)	359 days

Returns

LendingClub Net Annualized Return	9.70%
Excel XIRR (inc. cash drag)	9.36%

Strategy

• Buy and hold 36-month LendingClub securities - no secondary market activity.
• Initial deployment Top 10% P2P-Picks graded notes.
• ~50% 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).

[rawraw]

Are you interested in user returns?  I have a few separate P2P-Picks portfolios that I'm tracking the returns, but I do engage in Folio Sales of risk indications (such as crashing FICO)

[brycemason]

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.

[rawraw]

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. 

And I agree about the mean portfolio.  Just curious your thoughts

[brycemason]

Define management of holdings.

[rawraw]

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.

I sell at discounts, but still make positive returns while avoiding those huge subtraction from interest earned.

[Deming]

Average Portfolio Description (weighted by remaining principal where noted)

Interest Rate (weighted)	18.1%
Age (unweighted)	456 days
Age (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?

[brycemason]

Please refer to the first post on this thread, which details the timing of my cash outlay. It's been reinvested since those dates.