Truly Passive Investing in P2P Lending: Lend Academy Investments

Truly Passive Investing in P2P Lending - Lend Academy Investments Logo

Over the past year, many retail investors have felt frozen out as the competition for notes has increased drastically in both Lending Club and Prosper. As both companies have strived to obtain institutional investments as they push for profitability and growth, the ability for individual investors to invest has been severely limited. Currently, there are a few automated options out there for retail investors, yet none of these third-party tools allow for truly passive investing with managed portfolios available to regular, non-accredited investors. However, all this changes today with the launch of Lend Academy Investments, a brand-new registered investment adviser.

Lend Academy Investments

Founded this year, Lend Academy Investments is the culmination of a long process between Peter Renton, the founder of Lend Academy and co-founder of the Lendit Conference, and a couple of experienced investment professionals, Bo Brustkern and Jason Jones. Peter has long been respected as the foremost authority on peer to peer lending and the rapidly changing landscape in this new industry. His blog, Lend Academy,  is a must read site and a tremendous resource for any and all interested in peer to peer lending.

After receiving a couple of emails from readers of Lend Academy asking if he (Peter) could invest money for them, Peter began the process of finding the right partners to launch an investment platform. One of Peter’s primary focuses was making sure non-accredited retail investors weren’t completely cut out of the process when developing Lend Academy Investments. When I spoke to Peter last week, he offered the following:

“We want to allow individual investors to get the benefit of investing as an institutional investor. We’re leveling the playing field for them.”

~Peter Renton, co-founder of Lend Academy Investments

So what does Lend Academy Investments have to offer investors? There are three primary investment options offered, with two open to both accredited and non-accredited investors and the other one only focused on accredited investors. As a quick refresher for those who are unaware, accredited investors must meet either of the two following options: 1) Have greater than $1,000,000 of investable assets excluding their personal residence, or 2) Greater than $200,000 of income for an individual or $300,000 for a couple with the expectation that level of income will continue in the future. Obviously, these are some pretty stiff requirements for the traditional retail investor in peer to peer lending.

Non-Accredited Investment Options

The first two investment options are both separately managed accounts (SMAs) where your money is held with a custodian and the manager, Lend Academy Investments, has the authorization to invest in notes on your behalf. Currently, their designated custodian is Millennium Trust Company. As I said before, these two options are available to all investors, accredited or not. To invest in these accounts, you must invest a minimum of $25,000 and will be charged a 0.95% asset management fee. All of the money in either of these two options will be invested through the Prosper platform and investors must meet the basic Prosper requirements in order to invest.

Additionally, before I get into the two accounts, any and all return figures are targets and are not guaranteed in any way.

Option 1: Conservative – This first option has a targeted return, net of fees, of around 5% and will only be invested into AA and A rated loans with Prosper.

Option 2: Balanced – This second option will provide investors an indexed approach to the offerings at Prosper investing. The target return for this option is around 7.5% net of fees.

Accredited Investor Option

The third and final option is a diversified peer to peer lending fund is only available to accredited investors and has a minimum investment amount of $250,000. Because this is a more actively managed fund, it carries a larger asset management fee of 1.50%. This fee is a flat fee unlike many privately managed funds that include a percentage of the profits on top of the flat management fee. This fund will be diversified across Lending Club, Prosper, and Funding Circle USA (small business loans). Of course, given it is a more actively managed fund, the targeted returns are a bit higher, around 10%.

Peter and his partners will be utilizing a variety of investment techniques to achieve the higher returns, including different credit models and investment criteria sourced from both them and other peer to peer lending experts.

My Thoughts on Lend Academy Investments

Lend Academy Investments offers both non-accredited and accredited retail investors the opportunity to hire a professional money manager who is an expert in peer to peer lending. Given the depth of experience and exposure Peter and his team have to the burgeoning industry, I would anticipate this to be a successful venture providing a great service for those not willing to fight the battle of finding notes on a daily basis. Additionally, I think the fees that are being charged for the management of these investments is reasonable given the small account minimum for the two non-accredited options and level of management that will go into both of them. This is a truly passive means of investing within the peer to peer lending space.

Important to note is the registered investment adviser (RIA) designation that Lend Academy Investments has obtained. This is what allows them to legally manage your assets. Any third-party automated investment tool cannot make investment decisions on your behalf without this designation.

While $25,000 seems like a hefty account balance to start with, I believe that it is reasonable for those serious to gaining exposure to the asset class in a completely passive manner. Lend Academy Investment has expenses that occur for every account, and anything less than this minimum no longer makes financial sense for them.

For me personally, given the ‘hobby’ nature of my peer to peer lending investing (Lending Club/Prosper), I will always maintain a direct investment account, but would consider moving the bulk of my funds into a managed account in the future if the opportunity presented itself and made sense.

Would any of you out there consider letting someone else manage your peer to peer lending investments?

If you’re interested in Lend Academy Investments, feel free to check the out at their site here. If you have any questions about this as a possible investment, please let me know in the comments.

Additional media coverage can be found here: Bloomberg and Lend Academy

Note: I have no affiliate or financial relationship with Lend Academy Investments or any other entities mentioned in this article. Lend Academy Investments is a tremendous development for non-accredited investors and those looking to invest in the peer to peer lending space passively.

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  1. I saw this news on Peter’s site earlier today. Very cool! The only thing I wondered about is why there are only 2 options, conservative and balanced. I was waiting read about the “aggressive/are you nuts?” option, but it was not to be. This surprised me a bit because it seems to me like the most successful investors buy the riskier notes. I’m sure there is a reason for lack of this option. I’d be curious to know what it is though.

    • From my discussions with Peter last week and back in December about this, the primary reason is Prosper asked them not to focus exclusively on the lower graded notes due to the intense competition for those notes. A strong secondary reason (speculation on my part) is more consistent returns because of a lower risk of default due to external market conditions like an economic collapse.

      Thanks for stopping by Mr. 1500!

      • Interesting. I hope things change down the road from a note availability standpoint. I feel that the good times are behinds us forever.

        However, peer lending still isn’t mainstream and I think that there is a ton of potential to generate new business. I’d bet 95/100 on the street don’t even know what peer lending is.

        I didn’t know how good I had it 3 years ago!

        In any case, thanks for the follow up!

        • Great article!! I hadn’t heard about this yet. I agree about a more aggressive option, would be great and make the fees seem even that much more reasonable :)

          • Of course a more aggressive option would be great, but unfortunately I don’t think it is doable given the tremendous demand for those notes. It would make any managed accounts extremely difficult to stay fully invested on a larger scale.

            Thanks for stopping by Ryan!

  2. As Warren Buffett famously said “I think I could make you 50% a year with [only] $1 million”. The more money invested, the less selective one can be.
    So funds cannot focus on aggressive loans as much as individuals

    • You’ve hit the nail on the head here LR! The bigger the dollars, the harder it is to remain limited in your selection while working to stay fully invested.

      Appreciate you stopping by and commenting!


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