My quarterly market loan results – Q4 2019
I was finally able to conclude my quarterly performance report for the fourth quarter of last year. I shared my detail quarterly returns with readers since 2011 and will continue to do so for the foreseeable future. Given the turmoil we are in today, it will be fascinating to see how these companies resist as we are almost certainly heading into a significant downturn.
The fourth quarter of 2019 feels like a decade now with how much the world has changed. Since the economic slump didn’t really start until the second half of March, we won’t see much of the impact of returns, even in my Q1 2020 report. But this year is going to be at the very least. interesting.
Overall yield on market loans at 5.12%
The overall returns for calendar year 2019 from my market loan investments were 5.12%. This is a drop of over 1% from my last update, but the drop is almost entirely due to my biggest holding: the Lend Academy P2P fund which was hit hard in Q4. More on that below.
Interestingly, my first six LendingClub and Prosper accounts had their best quarter since Q1 2017 as the underwriting changes made in 2017 continued to pay off for investors. My only double digit holding is Streetshares again as it continues to perform very well.
Now let’s move on to the numbers. Click on the table below to see it in full size.
When looking at the table above, you should take note of the following points:
- All account totals and interest numbers are taken from my monthly statements which I download each month.
- The Net Interest column represents the total interest earned plus late fees and collections minus write-offs.
- The XIRR ROI column shows my actual return for the past 12 months (TTM). I believe the XIRR method is the best way for individual investors to determine their actual performance.
- The six older accounts have been separated to ensure a level of continuity with my previous updates.
- I do not take into account the impact of taxes.
Now I’m going to break down each of my investments from the table above grouped by company.
The screenshot above is from my wife’s traditional IRA account, which has been open for almost 10 years. It was opened with around $ 53,000, with no additional deposit, which means it has now doubled in that time. As I wrote before, I am in the process of liquidating my original LendingClub account which was opened in 2009 as it is taxable. For my consumer loan investments, I slowly liquidate my taxable accounts because of the tax benefits of an IRA account. For more information on LendingClub’s response to the coronavirus, you should check out Ryan’s latest update.
As with LendingClub, I liquidate my main taxable Prosper accounts and focus on my Roth IRA account (screenshot above) that I opened in 2014. I stopped reinvesting in my taxable account in September 2018 and I took money out as it accumulated, totally $ 50,000 last year. Overall, my Prosper Roth IRA account has been my best performing account over the past few years as it was set up from the start as a more conservative investment strategy,
P2P Loan Academy Fund
As you can see from the statement above, the Lend Academy P2P Fund, managed by NSR Invest, did not have a good year with only a return of 0.24%. We had to write down in the fourth quarter an investment we made in a trade finance platform called SureFunding where we had a small position. This resulted in a reduction in the value of this investment which had an impact on the net asset value of the fund. To be fair, we have underperformed our own fund for the past two years, so we made the difficult decision to close the fund. We will not reinvest and will return money to investors as the investments come to an end.
I have been a huge fan of the Asset Backed Small Business Lender, P2B investor, for many years and I was a member of their advisory board until the end of last year. But with a new property and no new investment available to investors for several months, I started to withdraw the money as it accumulated. They also had a few issues with the flaws, but overall it has been a good investment for many years.
I was invested with a real estate platform Peer Street now for almost four years. While many platforms have struggled in the real estate niche, Peerstreet has always been successful. While they have their challenges, like most lenders, during this difficult time, I have always appreciated their transparency.
Like every quarter for several years, my best performance is Street shares. I have invested in every loan they make available over the past year as they only make a small fraction of their loans available to investors on the platform. Most of the loans are funded by institutional investors and their own veteran bonds. It will be very interesting to see how Streetshares behaves in the future as the coronavirus wreaks havoc on small businesses, hopefully temporarily.
I have always liked the real estate platform AlphaFlow as they have provided excellent diversification in many properties and regions. But alas, they closed their doors to individual investors at the end of last year, so they are slowly liquidating the portfolio as the payments come in.
the Silver360 fund is focused on commercial real estate. The fund invests primarily in bridging loans in the range of $ 3 to $ 30 million for commercial buildings in various types of properties: office, retail, self-storage, hospitality, industrial, multi-family, prefabricated housing and residential. special. These are 12 to 36 month loans with an LTV of less than 75% and wide geographic diversification.
YieldStreet provides access to unique investments that were traditionally not available to individual investors. They’ve been in the news a bit in recent months because of a partnership with Blackrock, the world’s largest asset manager, as well as an interesting partnership with Citi. I am invested in investments as esoteric as the deconstruction of two container ships, other maritime financing for large ships as well as an art portfolio. These are not the types of investments that I have seen elsewhere.
Fund raising is a real estate platform focused on the unauthorized individual investor. I opened my account four years ago and continue to be impressed with their consistent performance. I am invested in their Income eREIT fund which is currently invested in 59 projects, mainly the construction of multi-family homes. New investors can start with just $ 500 and choose between additional income, balanced growth, and long-term growth.
I am very pleased with the rebound in my Prosper and LendingClub accounts as returns continued to improve throughout 2019. Companies significantly updated their underwriting models in 2017 and have continued to refine them since then, favoring a more conservative approach. This should help them weather the coming storm given the unprecedented economic conditions.
One of the criticisms that the alternative lending industry has received for many years is the fact that it has never stood up to a downturn. Well, everything is about to change. I think the second quarter of 2020 will be a different quarter than any other in history. We’ll see who not only has a strong underwriting, but who has the broad base of investor support that will allow them to continue to lend. The companies that do well will be the new leaders in the industry, but sadly I expect that many companies will struggle and some will not survive.
Finally, I will underline my net interest number. This is the money my wallet has actually made over the past year. With the struggles of my larger participation, that number is down significantly from last quarter, but at $ 39,523 it is still well above the lows I experienced in Q2 2018.
As always, feel free to share your thoughts in the comments below.