Good Riddance F and G Notes on Lending Club
When Lending Club announced they were discontinuing F and G grade notes on their platform for investors, I wasn’t surprised. Investors in general have been reporting disappointing returns, even dipping into negative territory some months. My own portfolio there is on track to generate a loss for 2017, which seems even worse when I consider that those funds could’ve returned nearly 15% in an S&P 500 index fund or more than 600% in bitcoin. Granted, only a small portion of my investable assets were tied up in Lending Club so it’s not all bad.
Out of the 3,262 notes I purchased on Lending Club, only 99 were F-grade and 53 were G-grade. They didn’t do so well in retrospect, echoing Lending Club’s findings.
27 of my G notes have already been charged off. 17 have been paid off, with the rest still outstanding. A charge-off rate over 50% is not so good on its own, but the data is worse because the interest earned on the performing ones was not enough to offset the charge-offs. Even if all of the remaining notes perform, it is no longer possible to earn a positive return on G notes. The amount I loaned exceeds the total dollars returned. The end result of a category that investors heralded as high-risk, high-return is a big fat loss.
31 of my 99 F notes have already been charged off. Only 26 remain outstanding, 4 of which are delinquent. The rest have been paid off. At this time, the amount I loaned exceeds the total dollars returned. It is still mathematically possible to break even if the remaining loans do not default, but we’ll see. Suffice to say, these were a bad investment.
I have been winding down my portfolio since May 2016. RIP F and G notes.Last modified: November 9, 2017
Sean Murray is the President and Chief Editor of deBanked and the founder of the Broker Fair Conference. Connect with me on LinkedIn or follow me on twitter. You can view all future deBanked events here.