Forbes: How You Can Put Your Money In Asset-Based Investments

July 9, 20185 min read
Forbes: How You Can Put Your Money In Asset-Based Investments
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YieldStreet CEO Milind Mehere is helping to change the way wealth is created.

Have you ever thought that there had to be a better way of doing something? You look at a situation and just know deep down that things need to change.

For Milind Mehere, that moment came when he was, in his words, “overexposed to the stock market.” Mehere “wanted to diversify and invest in asset classes like real estate or commercial businesses with strong cash flow to create a passive income stream.” However, “there wasn’t an easy and trustworthy way to participate in such investments, typically made by large [private equity] firms or hedge funds,” he says. “So, I was locked out and stuck.” That scenario wasn’t good enough for the tech entrepreneur. After all, you may recognize Mehere as the cofounder of Yodle, who helped grow the online marketing company to over $200 million in revenue until it was acquired for $342 million by in 2016. Today, he’s tackling the alternative investment space along with Michael Weisz and Dennis Shields. Being “veterans of the specialty finance industry,” Weisz and Shields “saw several inefficiencies in the fragmented hedge fund and [private equity] space,” explains Mehere. Together, the trio founded YieldStreet in 2015 as a way “to provide accredited investors access to asset based investments that were previously unavailable,” says Mehere. YieldStreet allows “investors to participate at minimums as low as $5,000 and earn target yields of 8-20%.” I asked Mehere what type of investments YieldStreet offers and how we can all get involved. Fortunately, for those seeking alternative investment ideas, you will have plenty of opportunities. Let’s take a look at what you can do with YieldStreet. A wide variety of investments — backed by collateral Diversifying your portfolio is, at this point, a cliche in the world of finance. Well, if diversification is what you’re looking for, YieldStreet is the place to be.

“We have a wide variety of investments which have included financing a manufacturing plant, portfolios of pre-settlement legal cases, real estate debt (residential, commercial and mixed use), loans to law firms, nursing home financing, triple net retail leases, etc.,” says Mehere.

Furthermore, your investments are backed by the asset, so you as the investor are more protected. With “traditional equity market based investment vehicles like your brokerage account or 401(k), where if there is a market correction or drawdown, the value of your investments simply decreases,” explains Mehere. However, “YieldStreet investments are backed by collateral and are debt-based so they pay a fixed interest rate during the duration of the investments.” That’s not all. If a default were to occur, Mehere says YieldStreet investors “have recourse and legal options to recover principal and often owed interest as well due to the collateral that backs the investment.” For example, in the event of a “default in real estate investment, you can liquidate the investment and try to collect your principal and interest.” So, what can you invest in? Now that you understand some of the benefits, let’s explore one of the actual investments YieldStreet offers. One investment option that caught my eye was litigation finance. So, I asked Mehere to provide a more in-depth look at this asset class. “Litigation finance is an interesting asset class,” says Mehere. “There are several types of litigation finance, including pre-settlement advances, post-settlement advances and law firm loans. To date, we have had offerings in all of these categories, but most commonly offer portfolios of pre-settlement advances.” So, how does the pre-settlement advance work and how do you make money? “Pre-settlement advances help fund the daily life expenses of a plaintiff while they await the settlement of a legal claim,” Mehere explained. “This cash advance, provided by a Pre-Settlement Advance Company (PAC) is typically used by the plaintiff to cover rent, mortgage, food, tuition or health care expenses.” What I found particularly interesting is that YieldStreet “will build a diversified portfolio of often a few hundred different advances based on historical data and variables such as case type, law firm, geography, and others,” as Mehere told me. “Typically advances included in a YieldStreet portfolio have been active for six months or more. Payments to YieldStreet investors occur as cases within the portfolio settle.” Who are alternative investments right for? Mehere suggests that any one of us can benefit from these types of investments. As he stated, we like to think of the investing journey as one that moves from spending/borrowing (think student loans, car, buying a house), to financial planning (stocks, ETFs, insurance etc.), to finally wealth creation (Real estate assets, income generating product such as YieldStreet).” Now, for somebody like me with a wife and two children, I could see YieldStreet-type investments potentially working for us. Frankly, Mehere makes a compelling case. “YieldStreet can give [your] family peace-of-mind that a portion of their investment portfolio operates independently of the stock market,” he says. “It can also add a certain level of predictability to [your] cash flows, as several of our offerings, especially in real estate, will make scheduled monthly interest payments to investors, and most investments make at least quarterly distributions.”
Additionally, Mehere’s company offers YieldStreet University, which it touts as based on a “‘Khan Academy meets Investopedia meets Ted Talks’ style environment.” Mehere explained that with “a significant number of our investors [being] new to the asset classes we offer, we think it is essential to provide resources and information that allow them to make an informed decision, and understand what they are investing in.” Look, it’s difficult to know with 100% certainty where to put your money. By definition, investing is risky. But, at least with YieldStreet you have another option. I’d say consider what they have to offer and see if it fits with your risk tolerance. “If you can’t explain the investment to your mom, don’t do it. Also, before you invest, try to understand what happens when the glass breaks,” Mehere advises. “What is the collateral that is generating the cash flow and how strong is that collateral? You don’t need to be an expert in alternatives but simply take some time to understand the asset class and the investment offering.” You could even try to get your first $5,000 together for the minimum investment by working another job, starting a side business, or selling some things around the house. This way you’re not exposing the income from your job. Either way, you need to put you and your family on the way to wealth. You now have another tool in your toolbox with YieldStreet. As Mehere boasts, “… we are changing the way wealth is created.” Decide for yourself whether or not you want a part of the action. Read the full article on Forbes.

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