Long-Term Performance and Potential of a Student-Managed Peer-to-Peer Loan Fund

In 2009, students at the University of Puget Sound started a unique student-managed fund focused on peer-to-peer (P2P) loans. Using the online Prosper and Lending Club P2P platforms, students are able to screen and evaluate peer borrowers' applications, which they may choose to fund with as little as $25 each. The consumer-oriented nature of the loans and the small investments required have made P2P lending an attractive option for a small student portfolio managed outside an endowment. In this paper, we describe our experience running this fund, which has consistently returned about 6% per year. We also discuss the potential for continued good performance, which is clouded by our increasing default rate and decreasing access to new loans. Institutional investors have moved in — and overrun — the P2P space. We conclude that the market is no longer as accessible or potentially profitable a mechanism for student experiential learning as it was when we began our fund