Investment due diligence at Yieldstreet

September 11, 20233 min read
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Before an investment opportunity makes it onto the Yieldstreet platform, it undergoes a stringent four-step vetting process designed to comprehensively review an investment opportunity through various risk lenses.

Our multi-step process is the reason we turn down most investment opportunities we evaluate. In fact, less than 5% of all investment opportunities evaluated by Yieldstreet made it to investors 2023 year-to-date.1 

Our vetting process at a glance

Stage 1: Originations and screening

The Yieldstreet originations team screens each opportunity and prospective partner. Yieldstreet leverages its network to access opportunities from multiple sources, including partner originators with successful track records. 

 We  eliminate the potential risks of doing business with those subject to prior scrutiny by others – including past material litigation or even certain government investigations into companies and the decision makers behind them.

Stage 2: Diligence

After the first screening, both the originations and investment teams evaluate a multi-step review of the track record, experience and reputation in their respective asset classes.

We take a structured, rigorous and holistic approach when scrutinizing originators and opportunities. Our structured assessment is based on multiple factors:

  • Management team experience, stability and exit strategy
  • Demonstrated track record and external validation
  • Alignment of interest
  • Infrastructure and overall strategy
  • Integrity
  • Regular reviews of originator/sponsor relationships

Stage 3: Assessment

The opportunity is then passed along to the respective Yieldstreet investment team. For example, a multi-family equity ownership opportunity would get passed along to Yieldstreet’s real estate team.

The team will evaluate some of the following components of a deal:

Investment thesis

  • Market trends and industry analysis, study of key players and stakeholders in the investment project, financial potential with emphasis on growth potential & cashflow and reviewing sensitivities, including possible negative outcomes
  • Assessment of Collateral Valuations support
    • Review of any financial architecture for enhanced returns
    • Insurance policies
    • Appraisal process
    • Cash flow characteristics, legal documentation and security perfection
  • Asset Third-Party Reports
    • Appraisal, condition, environmental, field exam, insurances, etc.
  • Borrower / Sponsor
    • Management bios, background and experience, background check & investigations, personal financial statements, tax returns, bank statements, etc.

Corporate and investment overview

  • Organizational, legal, and capital structure

Underwriting and allocation

  • Evaluation of key strengths and weaknesses of the transaction, including the financial and legal structure of the transaction

Documentation and legal

  • Review of key legal agreements, review of servicing and collection policy and procedures and other relevant documentation such as sub-advisor agreements and security perfection

Monitoring

  • Continuous monitoring of debt service coverage, financials, forecasts, budget collection policies, collateral tracking, etc.

Performance validation

  • Investment performance details including granular investment data and external validations

Yieldstreet carries out deal transaction “post mortem” reviews to compare outcomes to underwriting thesis to ensure continual learning and improvement.

Stage 4: Committee review

For each investment, the respective Asset Class team prepares a detailed Investment Committee memo designed to help identify any potential risks. They scrutinize and challenge the investment team’s conclusions.

The Green Light Committee (GLC) Is the next  opportunity for the teams to identify key considerations and risks that the investment team will need to address and review before moving forward. The Credit Committee (CC) considers opportunities later in the process, ensuring that any issues or questions raised have been appropriately addressed. The Investment Committee then considers the opportunity once more, and will only clear an opportunity for the Yieldstreet platform following a vote of the Investment Committee.

Stage 5: Investor decision


Once an investment opportunity has made it to the Yieldstreet platform, it still is subject to what we consider the most important vetting stage — our investors’ own decisions. Yieldstreet is ultimately all about empowering investors to exercise their own judgment, based on their own investment philosophies, and educated by the great wealth of information available to all of us. 

  1. As of August 31, 2023, based on number of investment opportunities.

We believe our 10 alternative asset classes, track record across 470+ investments, third party reviews, and history of innovation makes Yieldstreet “The leading platform for private market investing,” as compared to other private market investment platforms.

1 Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections may not reflect actual future performance. All securities involve risk and may result in significant losses.

3 "Annual interest," "Annualized Return" or "Target Returns" represents a projected annual target rate of interest or annualized target return, and not returns or interest actually obtained by fund investors. “Term" represents the estimated term of the investment; the term of the fund is generally at the discretion of the fund’s manager, and may exceed the estimated term by a significant amount of time. Unless otherwise specified on the fund's offering page, target interest or returns are based on an analysis performed by Yieldstreet of the potential inflows and outflows related to the transactions in which the strategy or fund has engaged and/or is anticipated to engage in over the estimated term of the fund. There is no guarantee that targeted interest or returns will be realized or achieved or that an investment will be successful. Actual performance may deviate from these expectations materially, including due to market or economic factors, portfolio management decisions, modelling error, or other reasons.

4 Reflects the annualized distribution rate that is calculated by taking the most recent quarterly distribution approved by the Fund's Board of Directors and dividing it by prior quarter-end NAV and annualizing it. The Fund’s distribution may exceed its earnings. Therefore, a portion of the Fund’s distribution may be a return of the money you originally invested and represent a return of capital to you for tax purposes.

5 Represents the sum of the interest accrued in the statement period plus the interest paid in the statement period.

6 The internal rate of return ("IRR") represents an average net realized IRR with respect to all matured investments, excluding our Short Term Notes program, weighted by the investment size of each individual investment, made by private investment vehicles managed by YieldStreet Management, LLC from July 1, 2015 through and including July 18th, 2022, after deduction of management fees and all other expenses charged to investments.

7 Investors should carefully consider the investment objectives, risks, charges and expenses of the Yieldstreet Alternative Income Fund before investing. The prospectus for the Yieldstreet Alternative Income Fund contains this and other information about the Fund and can be obtained by emailing [email protected] or by referring to www.yieldstreetalternativeincomefund.com. The prospectus should be read carefully before investing in the Fund. Investments in the Fund are not bank deposits (and thus not insured by the FDIC or by any other federal governmental agency) and are not guaranteed by Yieldstreet or any other party.

8 This tool is for informational purposes only. You should not construe any information provided here as investment advice or a recommendation, endorsement or solicitation to buy any securities offered on Yieldstreet. Yieldstreet is not a fiduciary by virtue of any person's use of or access to this tool. The information provided here is of a general nature and does not address the circumstances of any particular individual or entity. You alone assume the sole responsibility of evaluating the merits and risks associated with the use of this information before making any decisions based on such information.

9 Statistics as of the most recent month end.

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YieldStreet Inc. is the direct owner of Yieldstreet Management, LLC, which is an SEC-registered investment adviser that manages the Yieldstreet funds and provides investment advice to the Yieldstreet funds, and in certain cases, to retail investors. RealCadre LLC is also indirectly owned by Yieldstreet Inc. RealCadre LLC is a broker-dealer registered with the Securities and Exchange Commission (“SEC”) and a member of the Financial Industry Regulatory Authority (“FINRA”) and the Securities Investor Protection Corporation (“SIPC”). Information on all FINRA registered broker-dealers can be found on FINRA’s BrokerCheck. Despite its affiliation with Yieldstreet Management, LLC, RealCadre LLC has no role in the investment advisory services received by YieldStreet clients or the management or distribution of the Yieldstreet funds or other securities offered on our through Yieldstreet and its personnel. RealCadre LLC does not solicit, sell, recommend, or place interests in the Yieldstreet funds.

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