25% y/y Seasoned Returns in May with P2P Lending on Prosper

Seasoned Returns were 25% y/y in May for my peer to peer lending portfolio on Prosper, an interesting new asset class I’ve been experimenting with since late 2010. As a fixed income investment with a short duration (1.5-2.0 years) the margin of safety offered by consumer loans yielding 15-30% y/y make P2P lending a great new area to find yield, and returns have been consistent over the past 1.5 years.

Including “expected defaults” as well as existing defaults for P2P lending on Prosper the portfolio is yielding around 14% y/y, still the best yield I can find in the market at a duration of 1.5 years.

Portfolio summary:

• Seasoned returns: 25.29% y/y
• Notes: ~300 – hand picked
• Late notes: 5 notes past 30 days late
• Charge-offs: 7 (included in returns above)
• Average age of all notes in portfolio: 268 days

*Seasoned returns only include notes that are over 10 months old, which seems to offer a more stable look at returns because the 10 month window gives bad notes a chance to default and also gives good notes time to start paying interest