It has been almost four weeks since LendingClub closed down its retail investor platform and cash is already starting to build up. I have had many people reach out to me to ask what I am doing with this idle cash so I thought I would provide some suggestions.
Important note: Nothing I write here should be taken as investment advice. This article contains my own opinions only and may not be suitable for your circumstances. You should always consult with a finance professional before taking any action on investments.
Here are twelve platforms for individual investors, most of which I have made investments on, that provide a similar kind of return to what we came to expect from LendingClub. I have broken these down into two groups: non-accredited investor options and those for accredited investors only.
Non-Accredited Investor Options
- Prosper (prosper.com)
Prosper is the only offering that will provide exactly the same type of investment as LendingClub: unsecured consumer loans. I caught up with Prosper yesterday to get an update on their retail investor offerings and was pleasantly surprised. Retail Investor volume is up over 90% from April to December and this month is maintaining that trend. They are trying hard to ensure that idle cash is minimized and that is certainly true in my case as I am fully invested as of today. They are working on enhancements to the investor experience with an updated interface and new tools for monitoring investments. They are also committed to offering notes across the credit spectrum based on investor demand. Prosper increased interest rates at the start of the pandemic and the Loan performance for the 2020 vintage has been better than expected, performing even better than the typical vintage so far. To get more details on performance, you can read Prosper’s monthly performance updates on their blog. I will be increasing my allocation to Prosper significantly as cash builds up in my LendingClub accounts.
- Fundrise (fundrise.com)
Think of Fundrise as a low-cost REIT (Real Estate Investment Trust) built for non-accredited investors. They offer three plans depending on your risk appetite: Supplemental Income, Balanced Investing and Long-Term Growth with a minimum investment of $1,000. The portfolios invest in single family homes, multi-family housing, apartment building renovation and commercial buildings. There is a mix of both debt and equity deals. I opened an account there in 2015 and have averaged 7.3% since inception that includes a 4.5% return in 2020 with an Income portfolio.
- Groundfloor (groundfloor.us)
Still in real estate but with a different approach. The deals on Groundfloor are all real estate debt with a typical 12-18 month time horizon. Investors invest in fractional loans, similar to what LendingClub offered, with a $10 minimum per loan. The average loan size last year was $202,000 with an average of 710 investors per loan. In their 2020 Year in Review they shared that Groundfloor investors received an average rate of return of 10.42%. They had 10 defaults out of 444 loans and 190 loans in some kind of workout so that double digit return might be difficult to maintain going forward. But LendingClub investors will feel at home with the concept and the control that comes with building your own portfolio.
- Kickfurther (kickfurther.com)
I just had the Kickfurther CEO on the podcast earlier this month so you can get a deep dive on the company by listening to that episode. The idea behind this platform is that financing the sale of physical products is hard, particularly for small businesses. Individuals can sign up for Kickfurther and purchase inventory on consignment and are paid back when the products sell at retail. These buyers (they are not called investors) can typically earn 1% – 1.5% per month with a typical duration of less than six months. I have been a buyer on the platform for many years and am quite bullish on the concept.
- BlockFi (blockfi.com)
While this will not be for everyone, if you are a cryptocurrency enthusiast you should check out BlockFi. Started by a former Orchard executive, Zac Prince, BlockFi enables holders of popular cryptocurrencies to earn interest on their assets. The BlockFi Interest Account earns up to 8.6% annually with no fees and no minimum balances. They pay interest on bitcoin (6% APY), Ethereum (5.25%), Litecoin (5%), Pax Gold (5%) and Gemini dollar (8.6%). I have moved a good chunk of my crypto into BlockFi recently.
- Steward (gosteward.com)
Steward is a unique platform that allows qualified individuals to lend to sustainable farms. They call it CrowdFarming where lenders can purchase a Loan Participation tied to a specific farm. As of this writing there were four projects being funded with interest rates ranging from 5% to 9% and terms between 18 months and 84 months. The minimum for most projects is just $100. I have recently started lending, participating in three projects over the last couple of months.
- NSR Invest (nsrinvest.com)
While I no longer have anything to do with the day-to-day running of our sister company, NSR Invest, they still manage my Prosper IRA and have done so for many years. It happens to have been my top performing peer to peer lending account over the last five years. NSR Invest is helping their LendingClub clients transition over to Prosper and are also working on adding new opportunities. There will likely be opportunities announced shortly in real estate, factoring and other alternative fixed income investments. In addition they are building model portfolios based on publicly traded securities that will augment the alternative fixed income space.
- Masterworks (masterworks.io)
This is a platform I have only recently discovered and it is all about investing in art. You can build a diversified portfolio of works of art curated by the Masterworks research team. The Masterworks platform allows investors to start with $1,000 and buy fractional shares in artwork for only $20. The fees are not cheap, though. You pay 1.5% in management fees per year and then 20% of future profits. You have to apply to become an investor but even with that hurdle they already have tens of thousands of investors looking to invest in the next Picasso.
Accredited Investor Options
- Yieldstreet (yieldstreet.com)
Yieldstreet has become one of the most popular alternative investment platforms for accredited investors. They offer a range of investments covering asset classes that are not easy to access for individuals. Verticals like litigation finance, marine, art, commercial lending and real estate are all available within the platform. Most of the investments are backed by collateral. You can invest in individual deals when they hit the platform with minimums usually at $10,000 per deal or you can invest in the Yieldstreet Prism Fund with a $1,000 minimum. The fund targets an 8% return and invests across multiple asset classes. I have been investing here for several years as I like the diversification it provides.
- PeerStreet (peerstreet.com)
PeerStreet is a marketplace for investing in real estate debt, that offers loans that typically range from nine months to 24 months. They have $1,000 minimums per deal and have an automated investment option that allows you to set some criteria and let the platform do the work. New loans are added daily with detailed loan criteria available for analysis. Recently, PeerStreet announced Pocket, a new way to earn a return on your idle cash. They still have a waiting list but when it opens it will allow investors to earn 2% on their idle cash. This is something I would like to see more platforms add as most offer 0% or a nominal yield on uninvested cash.
- Sharestates (sharestates.com)
Sharestates is another real estate platform that offers slightly higher yields than PeerStreet, with larger loan sizes. The investment minimum is $5,000 and the average loan size is $894,000. Their average investor returns to date stand at 10.1% and even in the challenging year last year they returned 9.16% to investors. While they have 5.35% of their portfolio in foreclosure investors have suffered a total principal loss of just 0.09% to date. One thing unique about Sharestates is that they offer a redemption program where investors can sell back their note to Sharestates for a small loss.
- Cadence (withcadence.io)
Cadence offers a diversified mix of investments in a range of asset classes. These are typically high yield short term investments often offering returns in the double digits. Deals range from 9% to north of 15%. What I like about Cadence is they provide unique opportunities that you don’t see anywhere else. I have invested in motorcycle loans, crypto lending, e-commerce loans, healthcare receivables, small business loans in Mexico, consumer loans in Colombia, mobile app financing and accounts receivable financing. The minimum investment is usually $500.
I know this list is by no means complete as there are many more investment opportunities for those looking for high yield fixed income investments. But this should provide investors with some ideas as you look to move your cash out of LendingClub. Of course, I expect LendingClub will also come out with some alternatives of their own but in the meantime these are some alternatives that any investor can consider.