Lending Club Highlights Two Types of Investors

The peer-to-peer lending firm, Lending Club, recently highlighted two distinct classes of investment strategy that lenders are using on its platform during an online web-cast with its investors.

Lending Club frequently has online webcasts with is community of borrowers and lenders to let them know how to maximize their use of the service. Last night’s webcasts focused on different investment strategies. The company says that it has seen two very distinct types of investment strategies that people are making use of on its service based on the swaths of data that they have.

The first type of investor that the company says its seeing is what they call diversifiers. These investors hope to minimize their exposure to any single loan and try to invest their funds across as many different loans as possible. These investors are hoping to minimize their risk while getting a reasonable rate of return on their money.

The second type of investors that Lending Club has observed is loan pickers. These investors invest larger sums of money into each type of loan, however they do a much more thorough job of reviewing each loan listing’s data and go to the extent of asking borrowers lots of questions about their financial situation and purpose of the loan. These types of investors are generally out to “beat the market” and hope to get better rates of return by being more selective about who they fund loans for.

The company also suggested that there’s a third type of lender that’s a mix between the two, called a “diversipicker.” These lenders still pick and choose the loans that they want to put money in through various methods of screening, but they also attempt to put their funds in as many loans as possible.

The company said that being an effective “diversipicker” can lead to rewarding rates of return; however it takes significant work to review large numbers of loans to implement the strategy effectively.