Post by Ukmikk on Apr 13, 2017 10:01:18 GMT
I have recently created an account and added 2 tranches of cash to LW, 2k + 3k one week apart, and waited patiently for funds to be loaned out. My expectation was that once I reached the front of the queue my cash would be diversified across a number of loans.
I have now has some funds loaned out, but I'm confused about the 'on loan' information I'm being given, which begins with this statement; "To mitigate risk, your money is lent to various borrowers in individual chunks. Below are the details of all your loan chunks. ".
However I have only 2 'loan chunks' listed, both at £1,700, each taken from one of the two deposits made. (The remainder is still not loaned out despite being at the front of the queue for several days now, which is odd.) Do these chunks consist of a number of parts of different loans or am I invested in only 2 individual loans which seems to contradict the statement above and is not what I would expect in terms of risk mitigation? It appears I have invested £3.4k in just 2 loans, not something I feel comfortable with.
I emailed LW to query this but received the following reply; "The aim of the algorithm used, is to allocate your money across multiple loans. However, in some occasions the algorithm may be allocating slightly larger chunks of money to one borrower. For example; If £25,000.00 is borrowed by one individual and then split across 25 lenders, then the algorithm has still diversified the amount being borrowed by one individual."
This response seems to suggest that the algorithm has diversified funds for the borrower, which is of course irrelevant. I replied accordingly but am yet to hear back from LW.
As a lender, should I reasonably expect my funds to be diversified across different loans or are my expectations misplaced? What are the experiences of other investors on this site? Maybe the LW rep could comment please?
Thanks in anticipation.