An Institutional Investor Gives His Take on Lending Club and Prosper

It was love at first sight for Chris Spence of Diligentia LLC. Last year he was listening to the Marketplace Money radio show (one of my personal favorites) and a caller was discussing p2p lending. He had never heard of it before and he was intrigued.

Despite the fact that the radio announcer didn’t give a real positive response to the caller’s question he decided to check things out for himself. The more he researched p2p lending the more he loved the concept. He opened an account with Lending Club right away and followed soon afterwards with a Prosper account.

Chris is a serial entrepreneur who has started many companies, primarily in the healthcare space. But his passion is for investing. He had been investing informally for friends for many years but earlier this year he decided to formalize the arrangement, so he started an investment firm he called Diligentia LLC.

A Guaranteed Return for His Clients

From the start he wanted Diligentia to be a different kind of firm. His hook was to offer a contractually guaranteed level of return to his clients (7%) and then he would try and create a return superior to that and profit from the difference. This is obviously a risky endeavor to offer a guarantee like that but Chris believes this is a big differentiator for his firm. He invests clients’ money in a range of asset classes such as individual stocks, ETFs, real estate and now peer to peer lending.

The peer to peer lending portion of the portfolio is designed to be his high risk/high reward component so he only invests in the high interest loans: grades D and above. With regard to Lending Club, he uses the following filters as a minimum: no delinquencies in the last 12 months, no public records and verified income only. He focuses on previous borrowers on Prosper and wishes that selection criteria was available on Lending Club.

A Heavy User of the Lending Club and Prosper Platforms

Chris probably spends more time on the platform than most investors. While he has his filtering criteria he also likes to read the listing of every loan he invests in, so investing can be a time consuming process. He will spend anywhere from two to eight hours per day on Lending Club and Prosper depending on whether he has new client money to invest. He is also a heavy believer in diversification; he likes to invest just $150 – $250 per loan.

While he has done some of his own analysis he said that he also relies on Lendstats.com to back test many of his filtering criteria. Even though his portfolio is still relatively young he says he is delighted with the returns he has been getting. So far they are surpassing his expectations. So much so that he is planning to increase the percentage of his portfolio dedicated to p2p lending.

  • Peter Renton

    Peter Renton is the chairman and co-founder of Fintech Nexus, the world’s largest digital media company focused on fintech. Peter has been writing about fintech since 2010 and he is the author and creator of the Fintech One-on-One Podcast, the first and longest-running fintech interview series.