I think that most people have experienced lower returns over the last quarter, but I do not think it is an issue just with the last quarter.
I think the biggest reason for the decreasing returns is a result of LC lowering interest rates at least 3-4 times in the last 18 months. It is really hard to maintain our current risk appetite, not modify our filters and expect to maintain our old returns. We take the same risk for a lower average interest rate, it is simple math.
I also think supply has severely decreased over the last 12-18 months (at least for my filters). 2-3 years ago I was able to reinvest payments + $20k of new cash a month at $25 per loan without an issue. I have been forced to expand my filter criteria as well as my per loan investment. I now take more risk at a lower interest rate than I would have received had I taken that level of risk in the past. What I am finding is I am investing an increasing % of funds at a lower interest rate to simply get funds invested.
I am not saying cash drag is a result of decreased returns, I am simply not adding the level of new funds to the account that I would have in the past. As we all know, the returns are higher on "younger" funds, so the less "younger" funds and the increase in "aged" funds results in lower returns as well.
I am sure some will disagree, but I have a different strategy/objective than most. I am not worried about investing $10-20k and making 15%. My strategy needs to be able to invest $30k+ a month and maintain a consistent return. My personal IRA account has under $30k in it and makes 11.3%, but this account only gets $5.5k a year of new funds and I do not care if it takes 2 months to invest that $5.5k. So waiting for the right higher interest rate loans is easy. Dealing with accounts that have over $25k of monthly payments is a different beast.
I could go on forever, but will leave it at that. I think P2P provides great returns compared to all other fixed income style investments. Yes returns are going down, but I do believe just in the last 2 weeks or so, LC actually increased rates on some loans.