Investment due diligence at Yieldstreet
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, since 2018, less than 10% of all investment opportunities presented to Yieldstreet made it onto the platform1.
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.
- As of 12/31/2021, based on number of investment opportunities
What's Yieldstreet?
Yieldstreet provides access to alternative investments previously reserved only for institutions and the ultra-wealthy. Our mission is to help millions of people generate $3 billion of income outside the traditional public markets by 2025. We are committed to making financial products more inclusive by creating a modern investment portfolio.
2 Represents an average net realized internal rate of return (IRR) with respect to all matured investments in your portfolio, utilizing the effective dates and amounts to and from the investments and net of management fees and all other expenses charged to the investments. Past performance is not a reliable indicator of future results and should not be relied upon as the basis for making an investment decision. All securities involve risk and may result in significant losses, including the loss of principal invested.[read more]