individual investors now represent only 5% of originations
I wonder ... is this due to lack of retail investor interest? Or did the large investors simply gain interest and push out retail by being faster and cheaper and easier for LC to deal with?
Edward
LC learned they could grow faster in these other markets. LC has always had a very strong growth imperative. Therefore, they emphasized the markets in which they saw growth. Speaking of the growth imperative ... you see it in every quarterly investor conference call where they explain that they're losing money, but isn't it great that they grew. From an investor perspective, I think the huge growth story died a long time ago, and LC might be better off emphasizing profitable operation rather than growth. I don't think they are going to agree with me, so I don't try to engage them in argument.
Also, I believe they structure fees in such a way that the institutions pay them more than the retail customers do, per $ of loan. I know that sounds strange, but that's how my math comes out.
This led them to deemphasize the retail market, which led to a self-fulfilling prophesy. They don't work at generating interest among retail investors. ...so its no surprise that their view is that there isn't great demand in the retail market.
Renaud Laplanche, LC's original CEO often said that the retail market was important because retail investors are "sticky", ie likely to remain in place thru credit cycles. In a financial downturn, some institutional customers, hedge funds (for example) can literally dry up overnight. I believe Renaud's thoughts on this subject are long forgotten in today's LC management. Is that because the environment has fundamentally changed, or are they simply thinking short term?
On the other hand, they've moved past hedge funds, and now the majority of their business is with banks. I think banks are surely a lot stickier than hedge funds. The ecosystem around banks is complicated, and I'm not an expert on it. I don't understand why banks are so interested in investing in LC loans. ...but they clearly are. Many banks no longer view LC as a competitor and are essentially outsourcing lending operations to LC. There are exceptions of course: Marcus, etc.
They view themselves as playing in a different arena now. We're not in their arena any more.