I managed to invest in this listing on Prosper last week. It was open to investors for less than an hour and I happened to get lucky. If you look closely at the above graphic you will see that the first investor came in at 9:08am and the last (worth-blanket2) fully funded the balance of the loan at 9:57am.
So if you didn’t happen to login in that hour timespan you missed out on this loan. When worth-blanket2, Prosper’s largest investor by far, invests in a loan they typically fund the balance of the loan. This means individual investors like you and I miss out. Before July, this didn’t happen because automated plans on Prosper would invest money without the investor having to login to the platform. But today you have to be logged in to Prosper.com in order to invest.
I have pretty strict criteria for investing in Prosper. I mostly invest in previous borrowers who have maintained decent credit and these can be popular loans. Most of the loans I invest in are on the platform for less than a day. I am logging in to my Prosper account two or three times a day to ensure I invest in every loan I can that meets my criteria but even with this approach I know I miss out on loans.
When Prosper Adds Loans to Their Platform
I contacted Prosper about this problem and they gave me a tip that will help. Prosper adds new loans on to their platform at specific times each day. These times are 9am and 5pm (Pacific time) on weekdays and noon on Saturday and Sunday. So, if you want to invest in popular loans you should login just after those times. I checked this morning and there were 34 new loans added to the platform at 9am.
If you click through all the loans that worth-blanket2 invests in (this information is available on Lendstats) you will notice that they invest regularly (often daily) and they usually gobble up the remainder of the loan leaving other investors unable to invest. So if you want to get in before worth-blanket2 then you should make a note to login at these specific times to look for loans.
Can We Place Limits on Institutional Investors?
Not being an institutional investor with $150 million to invest I would like to see some limits placed on them. What I would like to see is either a time and/or funding limit. For example, they cannot invest in more than 50% of the loan or if they want to invest more than that they have to wait at least two days before investing. This will give retail investors a chance to invest in the loans, too.
Over at Lending Club this crowding out of retail investors rarely happens. Most of their institutional investors invest through their private placement funds which are managed by Lending Club. Though this fund invests millions of dollars every month they have a system which only allows the fund to kick in a pro-rata share of each loan based on the mix of retail and institutional demand of the previous week. It is a somewhat complex system that ensures retail investors a more level playing field.
Of course there is nothing on Lending Club stopping an institutional investor managing their own investments and crowding the retail investors out but the data suggests this doesn’t happen. Most loans stay on their platform 5-7 days giving ample time for retail investors to invest.
But getting back to the main point of this post. Quick moving Prosper investors can still invest in all the loans they would like by logging in at specific times each day. Do I wish it was easier than this? Of course. I would love Prosper to bring back automated plans or limit institutional investors but right now this is what we have to work with.
I know I will be logging in just after 9am and 5pm every weekday from now on to ensure I can invest in every loan that meets my criteria.
Peter Renton is the chairman and co-founder of LendIt Fintech, the world’s first and largest digital media and events company focused on fintech. Peter has been writing about fintech since 2010 and he is the author and creator of the Fintech One-on-One Podcast, the first and longest-running fintech interview series. Peter has been interviewed by the Wall Street Journal, Bloomberg, The New York Times, CNBC, CNN, Fortune, NPR, Fox Business News, the Financial Times, and dozens of other publications.