NSR Invest’s P2P Investing Model

Note from the Publisher:  We first met NSR Invest right after they launched, and learned that they offer an interesting platform for institutional investing in the marketplace lending sector.  The CEO Bo Brustkern is also a co-founder of the Lendit conference, along with several other members of their management team.  With the Lending Club bruhaha, and the P2P category generally underperforming of late, the firm announced earlier this month that it had made some adjustments to its credit models.  If you are interested in investing in this up-and-coming sector for clients or your alt fund but don’t know the best path to do so under current market conditions, NSR Invest offers an additional layer of risk mitigation, and hence is worth checking out. 

“We’re pleased to announce that we have recently completed an extensive process to improve the credit models we use as part of our Fully-Managed strategies. Our credit team made important changes, primarily focused on five key areas:

  • Refined loan selection algorithms to target better-performing loans
  • Updated allocations to optimize risk-adjusted returns
  • Improved target resiliency to protect against an economic downturn
  • Removed underperforming credit segments
  • Adjusted the Target Net Return for the Assertive strategy to 9%

Our analysis of actual client returns, as well as changes in marketplace underwriting policy, drove our decision to adjust the Assertive strategy’s Target Net Return. Due to the previously higher expected loss rate of the strategy, as a whole, client accounts experienced more significant volatility – making it the case that some client accounts met the return target, while others had returns materially different from aggregated returns.

With these changes, we feel confident that the lower risk of the portfolio will reduce the standard deviation of returns. Our analysis indicates that this should materially reduce the range of actual returns for Fully-Managed accounts – especially those using the Assertive strategy…..”

Source: NSR Invest