According to Reuters, Blue Elephant Capital Management has suggested that it will once again begin buying loans from Prosper in the near future. Chief Investment Officer Brian Weinstein said in an interview on Wednesday: "We're going to start buying again from Prosper over the next couple of weeks. It's the tighter models and the higher rates that are really driving our decision." Blue Elephant stopped buying Prosper loans last year, citing concerns about the platform’s underwriting criteria and the profitability of the loans.
Prosper announced a rate hike yesterday for the second time this year. Rates are rising by 0.29% on average across the entire Prosper loan book. The shifts in rate were more pronounced for riskier loans. The biggest change was applied to the platform's D loans, for which rates have risen by 1.42% to 23.00%. Prosper’s AA, A and B loan rates were left unchanged. As Prosper’s Chief Risk Officer Brad Pennington wrote in a blog post on Tuesday: “We believe that these proactive changes are necessary for us to continue providing a compelling fixed-income product relative to the many alternatives available to our investor community”.
In the wake of Renaud Laplanche’s shock departure from Lending Club – and even before – investor demand for marketplace loans has been cooling. A Prosper loans backed bond offering from earlier this year received a cold reception with investors (as reported by the Wall Street Journal). Jefferies and Goldman Sachs pulled back from a planned securitisation with Lending Club, and Lending Club has even suggested that it may be forced to fund some loans through its own balance sheet in the short term.
The return of Blue Elephant to Prosper is a welcome bit of news for the broader marketplace lending sector, and may suggest that that investor confidence is beginning to rebound.