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New for Investors: Asset Allocation, Seasoned Returns and More

Note: This article was first published in 2011 and remains published for archival purposes.

Prosper is excited to introduce important account enhancements for our investors: Asset allocation by Prosper Rating, term and Note status, and Reporting of Annualized Return on Investment, with an emphasis on Seasoned Only return; plus returns by Prosper Rating.  All with a brand new look to make it easy for you to see how your account is doing!

asset allocation

Account Value and Performance At-a-Glance

In one quick view, you can now see your account value and annualized return on the “My Account” overview page, which appears immediately upon sign-in.

Under “Account Value”, information for each asset (cash, Notes, pending transactions) is updated in real-time. Clicking on each asset type brings you to the redesigned “Investing” tab, described in more detail below.

A snapshot of “Annualized Returns” is also provided on the overview page. Returns are displayed two ways: For Notes that are “Seasoned”, which means those Notes aged 10 months or more, and for All Notes including both seasoned and unseasoned. We emphasize Seasoned Returns because we believe this is the most meaningful indication of the true underlying performance of Prosper Notes. Important details regarding Seasoned Returns are provided below.

Framing the My Account overview are Quick Invest, Browse Listings and Transfer Funds buttons, which route you quickly to these frequently performed activities.

Prosper Asset Allocation & Performance Details

The redesigned “Investing” tab under My Account provides detailed information conveyed in easy-to-read charts and graphs.

Simply toggle across the links under “Current Allocation” to view the pie chart that displays your Prosper investment allocated across Prosper Ratings, Term (duration of 1-, 3- and 5-years) or Status (e.g., current or delinquent). Dollar amounts and percentage of total provide additional perspective on how your investment is distributed.

On the right, we display Annualized Returns by Prosper Rating. You can view “Seasoned Only Return” for Notes 10 months or older, and “All Notes” to view your annualized return for both seasoned and unseasoned Notes.

“Seasoned Returns” Defined

Why do we show Seasoned Returns? The return that you earn on your Prosper investments is based on the lifecycle of the underlying Notes. Because a Note cannot default until five payments have been missed, your return for the first four months will be based entirely on those loans that remain current. This can result in a temporarily higher return than should be expected.

As Notes age, you may see initial defaults between their fifth and ninth months. Based on our research, our Note returns show increased stability after they’ve reached ten months of age. For that reason, we define “Seasoned Return” as the Annualized Return for Notes aged 10 months or more. We encourage you to pay closest attention to your Seasoned Return when evaluating the performance of your portfolio.

How are Annualized Returns Calculated?

To calculate Annualized Returns, a total gain or loss is calculated by summing all loan payments received net of principal repayment, credit losses, and servicing costs. The gain or loss is then divided by the average daily amount of principal outstanding to get a simple rate of return. To annualize that rate, we divide it by the dollar-weighted average Note age of your portfolio (calculated in days) and then multiply it by 365.

The Annualized Return calculation will always be displayed with an “As of” date, which is important to note since the return is likely to change with additional investing activity and ongoing performance of your Notes.

For Investors with Notes Prior to 2009

Annualized Returns are presented separately for Notes originated prior to 2009.  Returns are shown separately because two completely different risk rating and pricing systems were used during these time periods, and therefore the investments made before 2009 are not comparable to those made after 2009. Further details are provided on the Investing page.

Sign-in now to view these enhancements, and leave a comment below to let us know your feedback!

p.s. We couldn’t help but also improve the Quick Invest tool by making it even easier. Sign-in to check out Automated Quick Invest under My Quick Invest – we think you’ll love it! More news to come on this cool new feature that makes investing with Prosper faster, easier than ever.

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