Q1 2023 marked a record quarter for our ST Income Notes with investors allocating $44M+ to the program. Now with 20 matured notes, learn more about how we help shield the program from banking challenges, perspectives on the market backdrop, and realized performance.
Resilience amid banking challenges
In late-Q1, the banking system was shaken up by a number of high-profile failures. Even with the banking industries’ record levels of excess reserves, nervous depositor confidence led to a familiar example of accelerated bank runs.
Our ST Income Notes program has been resilient in this turmoil. Yieldstreet is not engaged and does not have any outstanding notes with any of the banks facing this liquidity crisis. Of the outstanding structured notes active in the program, +91% are held within banks included on the Financial Stability Board list of Global Systemically Important Banks (G-SIBs) — banks held to higher supervisory expectations and stress testing criteria. Given the increased counterparty risks in this environment, Yieldstreet has taken extra precautions to target buying only from G-SIBs or from highly-rated and well-established banks.
Inflation and rising rates
The Federal Reserve raised rates in March 2023 by 0.25% to continue its fight against inflation. Consumer prices rose again last month as it increased as of February’s CPI data +0.4%, after rising 0.5% in January and 0.1% in December. As a result, we may see businesses and consumers cut back on spending; coupled with the prolonged high inflation rate, we expect public markets will continue to be volatile.
ST Income Notes are designed to help protect investors in these times. They are hybrid vehicles with returns tied to an underlying stock’s performance:
- Each Yieldstreet ST Income Notes portfolio has three notes, each tracking a stock and each with a downside protection barrier.
- Each note pays a fixed quarterly coupon if the underlying stock’s price stays above the downside protection barrier.
- At maturity, when each note stays above the downside protection barrier, full principal is returned.
Banks/Financials and Tech stocks will not be included in upcoming funds as the highly volatile nature of those industries at the moment is an unnecessary risk in the current market landscape.
Returns increase in line with the Federal Funds Rate
As the federal funds rate continues to increase quarter over quarter, the Yieldstreet Structured Note program continues to increase gross coupons to investors while simultaneously ensuring a high level of downside barrier protection.
ST Income Notes realized returns
We began offering income notes on the platform in May of 2021. To date, 20 portfolios of ST Income Notes have matured.
As the wider markets suffered significant losses in 2022, it may affect some of our notes maturing over the next few months. However we have seen and are anticipating stronger performance than public markets.
*The realized net annualized return uses an internal rate of return (IRR) methodology. Cumulative historical interest and principal returns since inception are based on unaudited internal calculations, are subject to change, and may differ from fund returns and payments that an investor will actually receive.
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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 net annualized return, using an internal rate of return (IRR) methodology, with respect to the matured investments shown in your Portfolio experience, utilizing the effective dates and amounts of subscriptions and distributions to and from the investments, net of management fees and all other expenses charged to the investments.[read more]