Hacker News Reader

Comment by vosper | Hacker News Reader

> Other platforms, such as Prosper Marketplace Inc., Avant Inc., or On Deck Capital Inc. have reported either slowing investor demand for loans or a drop in lending volume this year, the result of investors’ skepticism of future returns on online loans and because they see greater opportunity in other bonds.

So where is the smart money going? Lendingclub and Prosper have had reasonable returns for me, and seem like a good way to diversify my investments a bit.

View on HN

Theoretically, this is the best time for small investors to buy LC loans. The hedge funds have backed out, so you can get better yield loans for much more competitive pricing. This is unless you think the institutional investors know something you don't, as opposed to just rebalancing their portfolios.

I'm not very strong on finance at all, but if the hedge funds have pulled their money out of the Lendingclub platform then shouldn't that reduce the amount of money that Lendingclub has to lend and therefore drive up the cost of taking a loan from them, assuming demand for their loans hasn't dropped as well? Like a basic supply and demand thing?

Yes, exactly. What I think the poster was suggesting is that, in theory, now is a good time to be investing in LC loans -- because the rates will be driven up due to the lower availability of capital on the platform. If he was suggesting something else then I'm in the same boat as you, hehe. ;-)

I do tend to think that the institutional investors/hedge funds are quite likely to "know more than you do" however, which could instead mean that this is an early signal & would be a foolish play.

No loans just don't get funded

Yeah. The Lending Club loan would still need to compete in the broader market, which means that there is a point where the borrower would opt to not take the more expensive loan.

Only if the price stays the same.

> The hedge funds have backed out

What's your source for this claim?

What bonds? Lc pays around 7%. I've never seen a bond over 1%

>I've never seen a bond over 1%

The BAA Corporate index is 4.79%.

And junk corporate bonds are probably less likely to default than LC loans.

The difference between LC and a Junk corporate bonds is that with LC you are investing in hundreds of loans at $25 each. You can't get the same kind of diversification corporate bonds.

> The difference between LC and a Junk corporate bonds is that with LC you are investing in hundreds of loans at $25 each. You can't get the same kind of diversification corporate bonds.

Are diversified bond funds not a thing now?

I assumed we were talking about investing directly in the bonds. Even if you do an index fund though that 4.79% is ignoring fees. The LC returns being talked about are after fees.

Which bond funds would you recommend and what are their current rates?

My after-default rate with LC for >1,000 loans is 6.7%. After default.

Isn't the competitor in this space the Credit Card companies?

Reply on news.ycombinator.com