Private market planning checklist for 2023

December 16, 20224 min read
Private market planning checklist for 2023
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As we start out 2023, it can be a good time to take inventory, help maximize tax savings, and plan for the year ahead. In consultation with your advisors, review the following private market planning considerations from our investment professionals. 

1. Evaluate portfolio diversification

Similar to a portfolio of stocks and bonds, an alternative investment portfolio is typically most effective when highly diversified. 

Start by evaluating diversification across asset classes. Are you highly concentrated in a particular alternative asset class? Or is your portfolio spread across multiple asset classes like real estate, art, private credit, legal, structured notes, and more? 

Then, consider how your portfolio is diversified across the following attributes: 

  • Range of return targets, and therefore risks 
  • Debt vs. equity 
  • Time horizons
  • Liquidity 
  • Sponsors/originators/fund managers

2. Plan for upcoming maturities 

Staying invested and minimizing cash drag are key contributors to long term wealth generation. For the year ahead, consider mapping out your expected investment maturities to see when you will have opportunities to reinvest. Keep in mind, target maturity dates may change throughout the lifetime of your investment. 

Yieldstreet now notifies investors ahead of an upcoming maturity or a large partial repayment so you can begin evaluation of your next investment opportunity. For some offerings, you can opt to immediately roll over your investment into a new opportunity. 

In planning for future investments, you may consider looking to spread out target maturity dates to avoid an unintended significant liquidity event. 

3. Review income needs 

Many of our investors use income-generating assets to support their ongoing lifestyle expenses. Could income-generating alternatives play a role in your overall strategy for 2023?

Investments like structured notes, private credit, real estate debt, art debt, legal finance, and more generally target regular income. Or consider allocating to a multi-asset class fund to target consistent quarterly payments. 

4. Leverage a tax-advantaged account 

Does a portion of your Roth or Traditional IRA account contain private market investments

For growth-focused investments, high alternative asset appreciation could grow tax-free with a Roth IRA. Or with a traditional IRA, realize gains in a potentially lower tax bracket. 

For investments that generate regular payments, an IRA can help reduce higher ordinary income tax exposure through deferral of recognition.

5. Examine where your cash is held 

As a result of the Federal Reserve’s aggressive rate hiking spree, investors have significantly better options for storing cash heading into 2023. 

The Yieldstreet Wallet, an FDIC-insured savings account held at Evolve Bank and Trust, now earns 2.75% APY. This is significantly above the average savings account APY of 0.21%, according to the FDIC as of Dec. 1.

If you are seeking a higher yield, our Short Term Notes program is commonly used by investors seeking to house their cash. Notes pay monthly income, have a net annualized yield from 3.75% to 6% 1, and terms as short as three months.

Holistic investment portfolio review

2022 exposed significant gaps in the traditional 60/40 portfolio as stocks and bonds were both simultaneously in decline. As we face ongoing geopolitical uncertainty, inflation and public market volatility, consider if increasing your allocation to private markets could be advantageous. 

Investment managers often recommend allocating up to 20% of a portfolio to private markets. What is your current allocation? 

Yieldstreet cannot and does not provide tax advice and this communication is for illustrative purposes only and is not intended to be – and should not be construed as – tax advice. Further, this communication should neither be construed nor intended to be a recommendation to purchase, sell or hold any security or otherwise to be investment, financial, accounting, legal, regulatory or compliance advice. Investing in private markets and alternatives is speculative and involves a risk of loss, and those investors who cannot afford to lose their entire investment should not invest. Returns are not guaranteed.

1. In particular, U.S. tax code has several specific rules related to tax-loss harvesting and related matters. Please consult a tax professional for advice specific to your situation. 
2. Target Returns represents a projected annual target rate of interest or annualized target return, and not returns or interest actually obtained by fund investors. 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, modeling error, or other reasons. Gross targets do not reflect the impact that the deduction of advisory fees and other expenses would have on returns.