Thursday, February 12, 2009

Javelin reviews investing with Lending Club

Javelin Strategy & Research just released a 12-page whitepaper analyzing investments through Lending Club between June 2007 and December 2008. They found the overall investment return averaged 9.05%, with a median return of 10.48%.

Compared to other investments, Javelin reported:

"If an individual had invested $10,000 in June 2007, a typical (median) loan portfolio through Lending Club would have grown to $11,594 by November 2008. That return would have outpaced other common investments or indexes such as the Standard & Poor’s 500 Index and the tech‐stock heavy Nasdaq Composite Index, which suffered staggering losses that would have left the investor with $6,289 and $6,604, respectively. Meanwhile, the same investment in government‐insured 1‐year CDs and rock‐solid 6‐month Treasury bills would have grown to $10,678 and $10,501, respectively. (This comparison factors in Lending Club’s 1% service charge but does not include fees and other transaction costs for the other investments.)"

Read the whitepaper. Open a Lending Club account.


Adam said...

You realize this is paid research, right? On page 10 it says:

Lending Club paid Javelin Strategy & Research a total of $23,500 to perform this analysis.

Seems to undermine the integrity of the analysis. If I gave you $23k, wouldn't you tell me that I'm beautiful?

Tom said...

Yes Adam, if you give me $23K I will tell you you are beautiful.

It is pretty common for companies to pay for research and whitepapers like this. The disclosure is all there.

The methodology behind the analysis is explained in detail. Do you have a problem with the methodology or would you calculate things differently?