Are you investing in new notes at LC

[jz451]

Makes you wonder what they were investing in. Those returns look like someone who invested in only F-G and had a bad month. Based on the name of the fund "Broad Based Consumer Credit" I would sure hope it mirrors the distribution of all loan grades.

When shopping for a burger, I don't examine the profitability of McDonalds and Jack In The Box.

  This is a pretty ridiculous analogy and I think you know it. You won't be laughing if LC goes out of business and serious questions arise about who gets the proceeds from the notes.

More hamburglary...

http://www.wsj.com/articles/lendingclub-fund-falters-1464218283
http://www.marketwatch.com/story/worrying-signs-from-lendingclub-investment-fund-2016-05-25

[PhilGD]

Makes you wonder what they were investing in. Those returns look like someone who invested in only F-G and had a bad month. Based on the name of the fund "Broad Based Consumer Credit" I would sure hope it mirrors the distribution of all loan grades.

More hamburglary...

http://www.wsj.com/articles/lendingclub-fund-falters-1464218283
http://www.marketwatch.com/story/worrying-signs-from-lendingclub-investment-fund-2016-05-25

From the article:

In a letter to investors on Tuesday, LendingClub Chief Financial Officer Carrie Dolan said that valuation adjustments on existing loans, due to increases in interest rates charged for new loans to borrowers earlier this year, were driving the weaker performance.

So the lower return was not due to credit performance.

[Fred93]

Makes you wonder what they were investing in.

All grades, similar to whole platform statistics.

Those returns look like someone who invested in only F-G and had a bad month. Based on the name of the fund "Broad Based Consumer Credit" I would sure hope it mirrors the distribution of all loan grades.

The reduced earnings in April are mostly due to a mark-to-market adjustment of loans in the portfolio, driven by the recent rate increases.  They calculate an adjustment, and then take it all immediately.  This is not the same way most retail lenders calculate their returns.  Most retail lenders would not consider the rate increase to reduce the value of their portfolio, as they intend to keep the loans until they mature. 

If you are interested in the details you can call LC and ask for the monthly tear sheet for the broad-based fund.  I believe they'll happily send you a copy.

[SLCPaladin]

Makes you wonder what they were investing in. Those returns look like someone who invested in only F-G and had a bad month. Based on the name of the fund "Broad Based Consumer Credit" I would sure hope it mirrors the distribution of all loan grades.

When shopping for a burger, I don't examine the profitability of McDonalds and Jack In The Box.

  This is a pretty ridiculous analogy and I think you know it. You won't be laughing if LC goes out of business and serious questions arise about who gets the proceeds from the notes.

More hamburglary...

http://www.wsj.com/articles/lendingclub-fund-falters-1464218283
http://www.marketwatch.com/story/worrying-signs-from-lendingclub-investment-fund-2016-05-25

I'm not a finance guy, but it looks like part of the so-called poor performance may have been triggered by the adjustment of interest rates:

In a letter to investors on Tuesday, LendingClub Chief Financial Officer Carrie Dolan said that valuation adjustments on existing loans, due to increases in interest rates charged for new loans to borrowers earlier this year, were driving the weaker performance.

[SLCPaladin]

Fred93 beat me to it. What he said.

[SLCPaladin]

I thought the more interesting part of the article was this:

LC Advisors also told its investors—who comprise wealthy individuals, families and small hedge funds—that more than 60% of its loans were five-year loans, versus a maximum target of 42%, the correspondence with investors said. The fund also invests in three-year loans.

Makes me want to eschew 5-year loans completely if 3-year notes is what the putative smart money is insisting on.

[nonattender]

I thought the more interesting part of the article was this:

LC Advisors also told its investors—who comprise wealthy individuals, families and small hedge funds—that more than 60% of its loans were five-year loans, versus a maximum target of 42%, the correspondence with investors said. The fund also invests in three-year loans.

Makes me want to eschew 5-year loans completely if 3-year notes is what the putative smart money is insisting on.

Yeah, they buried the lead.  What's a couple hundred million out of tolerance? 

[Fred93]

I thought the more interesting part of the article was this:

LC Advisors also told its investors  ... that more than 60% of its loans were five-year loans, versus a maximum target of 42%, ...

Yeah, they buried the lead.  What's a couple hundred million out of tolerance? 

60.9% - 42% = 18.9% outside target allocation
18.9% x $825M fund size = $156M. 

They were inside the target range in 2013, but like the Jefferson's, they've been "movin' on up" ever since.  The allocation shifted a little bit almost every month. 

I've sent a note to my contact at LC asking if & when they intend to correct this.

Apr 2016  60.9%
Mar 2016  60.31%
Feb 2016  60.01%
Jan 2016  58.1%

Dec 2015  57.0%
Nov 2015  55.7%
Oct 2015  54.6%
Sep 2015  54.1%
Aug 2015  53.3%
Jul 2015  52.7%
Jun 2015  51.5%
May 2015  52.7%
Apr 2015  51.6%
Mar 2015  52.1%
Feb 2015  51.7%
Jan 2015  51.8%

...
Jan 2014  44.4%

[investny]

Some of Wall Street’s biggest banks are making contingency plans to cut their exposure to online consumer loans if the market deteriorates further after the recent crisis at LendingClub Corp.
http://finance.yahoo.com/news/banks-said-devise-plans-cutting-221736954.html

more on Cirrix
http://finance.yahoo.com/news/mack-disrupted-wall-street-waltzed-080007974.html

[sommers]

5) LC hasn't proven that the business model is that viable. Even in 1Q16, they were only minimally profitable. If originations go down this quarter then LC is probably back in the red.

I believe it is an absolute certainty that they will be in the red Q2.  There's just no way to make the arithmetic work to get a profit. 

For me, this is not a significant issue when deciding whether to buy their product (notes).  When shopping for a burger, I don't examine the profitability of McDonalds and Jack In The Box.

Buying a burger is analogous to investing in LC notes?  huh?

[Fred93]

Buying a burger is analogous to investing in LC notes?  huh?

The notes are LC's "product".

[andy3109]

CF RS?

CrowdFunding Real estate

[Cidney369]

I'm still adding new money and investing in notes as usual.  Reinvesting all interest and return of principal.  I'm satisfied with the quality of notes I've purchased in the last week.  My expectation is that borrowers will continue to pay on their loans. Lending Club is an amazing concept.  It's likely some big money will come to the rescue or there will be a purchase of LC, especially with the share price so low.  In fact, a Chinese investor already has snapped up 11% of LC shares. The concept is growing in the EU and in China.  I think the Board acted quickly and appropriately.

[ThinleyWangchuk]

Quality of notes are improving - investing in new loans

[twigster]

Quality of notes are improving - investing in new loans

I was just buying Folio notes all at a significant discount, noticing that the YTM was greater than the note interest rate, then looked at the current interest rates here:
https://www.lendingclub.com/public/rates-and-fees.action
Most of the existing folio notes even when purchased at a discount, the YTM is still below the new notes since the interest rates on the new notes is much higher than the existing pool of notes on folio.  Makes sense, they have moved interest rates up so there should be a sizable discount on folio anyway [even if there was no other issues with investor confidence]. 
ergo:  now buying more new loans and checking ytm exceeds new note interest rate on folio before purchase