Yieldstreet Prism Fund Update: Q4 2021

January 31, 20226 min read
Yieldstreet Prism Fund Update: Q4 2021
Share on facebookShare on TwitterShare on Linkedin

The S&P 500 Index roared back in the final quarter of 2021, returning 11.0%, with growth equities leading the way, returning 13.4% and outperforming value equities. The strong finish to the year brought the total return for the S&P 500 to 28.6%, marking its third straight impressive year with the index eclipsing a 100% cumulative three-year return. 

Interestingly, the price-to-earnings (P/E) ratio, a valuation measure of stocks, stood at an elevated 27x at the end of the year, a level only surpassed one other time since 2009. As of this writing, the equity market has begun the year with a dramatic selloff on the fear of rising rates, putting downward pressure on valuations. The Federal Reserve’s Open Market Committee (FOMC) response and policy for 2022 and beyond will likely be the key driver to whether this is a mid-cycle correction before returning to the positive equity momentum experienced since the March 2020 lows, or instead, something more reminiscent of previous sustained down markets. 

In fixed income, the 10-Year US Treasury yield oscillated within a 0.3% range before ultimately settling the quarter unchanged. For the year, the 10-Year yield rose ~0.6%, continuing its move higher off the all-time lows established during the onset of the COVID-19 pandemic. The Bloomberg US Aggregate Index, the most widely used fixed income index, returned -1.8% for the year, which was its third negative year in the past ten, after not having experienced a negative year since the 1990s. 

During the quarter, the Fund returned 0.1%, which was due in part to a position in 51job, Inc., an non-US recruiting and human resources services firm. The position was acquired in the third quarter as part of the Fund’s secondary strategy: capital appreciation. The investment thesis is centered around an arbitrage opportunity by acquiring the shares at a cost basis of ~$71 per share, well below 51job’s agreed-upon merger price with a Chinese-based buyer group of $79 per share. During the fourth quarter, 51job’s share price declined in line with the broad selloff in Chinese equities coupled with uncertainty around the merger’s completion. As of December 31, 2021, the share price of 51job was ~$48 per share. Despite the recent performance, we still maintain our original thesis which is outlined below:

  • Yieldstreet believes that the merger will occur, although perhaps not at the deal price, but above the current price;
  • The timeline of the merger is facing temporary delays as regulatory advice has been sought to ensure compliance with local regulations;
  • There is a merger agreement in place and the company has issued no information indicating the deal will not occur under agreed-upon terms; 
  • The share price is currently trading at a discount to the contractual deal price largely due to a broader selloff in its respective sector, which is facing regulatory and geopolitical uncertainty.

For the year, the Fund returned 5.0%. For additional context, the Fund outperformed the Bloomberg US Aggregate and the Bloomberg US Corporate High Yield Indices, which returned -1.8% and 4.3%, respectively for the year. 

The Fund distributed $0.20 per share in December, bringing its year-to-date total distributions up to $0.80 per share, which tracks on pace to meet the Fund’s target distribution rate of 8% for the year2

The Fund completed its third tender offer to provide liquidity to investors during the fourth quarter. Alternative investments are inherently less liquid, but Yieldstreet continues to pursue pathways to provide liquidity for such investments. The Fund expects to continue to offer liquidity to investors through tender offers each quarter, subject to the discretion of the Fund’s Board of Directors.

Portfolio Composition3

During the quarter, the Fund’s allocations to Real Estate and Legal increased due to a combination of new investments as well as an additional capital call from one of its Legal investments. Allocations to Consumer, Commercial, and Art saw the largest decrease due to the maturity or early repayment of multiple investments. Cash in the Fund increased as most of the repayments occurred late in the quarter before proceeds could be redeployed.

Highlighted Deal

The Fund invested in a junior mortgage and mezzanine loan primarily secured by a substantially completed multi-family development and parcel of land in Harrison, New Jersey. The new loan restructured the previous $89.5M loan, which closed in December 2019 after the borrower did not meet its obligations. The COVID pandemic and increased supply costs caused the borrower to fall behind anticipated construction milestones and the project to run over budget. The loan refinanced the previous lender and provided additional capital (a recapitalization) to the borrower to help finish the construction project.

Outlook

The Fund’s investment objective remains to generate current income and, as a secondary objective, capital appreciation. With interest rates remaining low, we believe that opportunities in fixed income are becoming comparatively less attractive than prior to 2021. As such, we continue to be selective when adding fixed income investments to the portfolio, and instead have deployed the Fund’s capital into opportunities that we believe fit the Fund’s secondary objective. 

Private investments that focus on capital appreciation typically have two impacts on a portfolio. The first is that much, if not all, of their returns tend to be tied to a single event. For example, if the Fund were to purchase an equity stake in a commercial real estate building, the vast majority of returns would be expected to be realized when the building is sold, and not necessarily realized in the portfolio at any point prior to the sale of the building. The second impact is that for a Fund that has current income as an  objective, these investments generally do not accrue interest during the life of the investment, and therefore do not contribute recurring income to the Fund. 

While we continue to seek attractive fixed income opportunities on behalf of the Fund to help it fulfill its current income objective, we are also finding opportunities with a capital appreciation focus that we believe to be more attractive. Additionally, we remain patient with respect to seeking investment opportunities on behalf of the Fund.

In terms of asset classes, the team continues to have a constructive view on opportunities in Commercial Real Estate and Specialty Lending. 

1. Source: Bloomberg, as of 12/31/2021.

2. 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.

3. Source: Yieldstreet, as of 12/31/2021. Notable additions and subtractions are for the third quarter period.

Performance quoted herein represents past performance, which is not a guarantee of future results. All investing involves risk, including the loss of principal. Investment returns and principal value will fluctuate, so you may have a gain or loss when shares are sold. Current performance may be higher or lower than the returns quoted herein. 

This report contains certain unaudited financial information related to YieldStreet Prism Fund Inc. (the “Fund”). Specifically, the Fund’s financial information included herein for the quarter ended December 31, 2021 and for the twelve months ended December 31, 2021 is preliminary and was  not subject to an audit or an audit review process or otherwise independently verified and is subject to revision as a result of the audit process currently being undertaken. Such unaudited financial information is being included for informational purposes only.

Investors should carefully consider the investment objectives, risks, charges and expenses of the YieldStreet Prism Fund before investing. The prospectus for the YieldStreet Prism Fund contains this and other information about the Fund and can be obtained by emailing [email protected] or by referring to www.yieldstreetprismfund.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.  

The securities described in the prospectus are not offered for sale in the states of Nebraska or North Dakota or to persons resident or located in such states. No subscription for the sale of Fund shares will be accepted from any person resident or located in Nebraska or North Dakota.

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 Prism Fund before investing. The prospectus for the Yieldstreet Prism Fund contains this and other information about the Fund and can be obtained by emailing [email protected] or by referring to www.yieldstreetprismfund.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.

300 Park Avenue 15th Floor, New York, NY 10022

844-943-5378

No communication by YieldStreet Inc. or any of its affiliates (collectively, “Yieldstreet™”), through this website or any other medium, should be construed or is intended to be a recommendation to purchase, sell or hold any security or otherwise to be investment, tax, financial, accounting, legal, regulatory or compliance advice, except for specific investment advice that may be provided by YieldStreet Management, LLC pursuant to a written advisory agreement between such entity and the recipient. Nothing on this website is intended as an offer to extend credit, an offer to purchase or sell securities or a solicitation of any securities transaction.

Any financial projections or returns shown on the website are estimated predictions of performance only, are hypothetical, are not based on actual investment results and are not guarantees of future results. Estimated projections do not represent or guarantee the actual results of any transaction, and no representation is made that any transaction will, or is likely to, achieve results or profits similar to those shown. In addition, other financial metrics and calculations shown on the website (including amounts of principal and interest repaid) have not been independently verified or audited and may differ from the actual financial metrics and calculations for any investment, which are contained in the investors’ portfolios. Any investment information contained herein has been secured from sources that Yieldstreet believes are reliable, but we make no representations or warranties as to the accuracy of such information and accept no liability therefore.

Private placement investments are NOT bank deposits (and thus NOT insured by the FDIC or by any other federal governmental agency), are NOT guaranteed by Yieldstreet or any other party, and MAY lose value. Neither the Securities and Exchange Commission nor any federal or state securities commission or regulatory authority has recommended or approved any investment or the accuracy or completeness of any of the information or materials provided by or through the website. Investors must be able to afford the loss of their entire investment.

Investments in private placements are speculative and involve a high degree of risk and those investors who cannot afford to lose their entire investment should not invest. Additionally, investors may receive illiquid and/or restricted securities that may be subject to holding period requirements and/or liquidity concerns. Investments in private placements are highly illiquid and those investors who cannot hold an investment for the long term (at least 5-7 years) should not invest.

Alternative investments should only be part of your overall investment portfolio. Further, the alternative investment portion of your portfolio should include a balanced portfolio of different alternative investments.

Articles or information from third-party media outside of this domain may discuss Yieldstreet or relate to information contained herein, but Yieldstreet does not approve and is not responsible for such content. Hyperlinks to third-party sites, or reproduction of third-party articles, do not constitute an approval or endorsement by Yieldstreet of the linked or reproduced content.

Investing in securities (the "Securities") listed on Yieldstreet™ pose risks, including but not limited to credit risk, interest rate risk, and the risk of losing some or all of the money you invest. Before investing you should: (1) conduct your own investigation and analysis; (2) carefully consider the investment and all related charges, expenses, uncertainties and risks, including all uncertainties and risks described in offering materials; and (3) consult with your own investment, tax, financial and legal advisors. Such Securities are only suitable for accredited investors who understand and are willing and able to accept the high risks associated with private investments.

Investing in private placements requires long-term commitments, the ability to afford to lose the entire investment, and low liquidity needs. This website provides preliminary and general information about the Securities and is intended for initial reference purposes only. It does not summarize or compile all the applicable information. This website does not constitute an offer to sell or buy any securities. No offer or sale of any Securities will occur without the delivery of confidential offering materials and related documents. This information contained herein is qualified by and subject to more detailed information in the applicable offering materials. Yieldstreet™ is not registered as a broker-dealer. Yieldstreet™ does not make any representation or warranty to any prospective investor regarding the legality of an investment in any Yieldstreet Securities.

Yieldstreet is not a bank. Certain services are offered through Synapse Financial Technologies, Inc. and its affiliates (collectively, “Synapse”) as well as certain third-party financial services partners. Synapse is not a bank and is not affiliated with Yieldstreet. Bank accounts are established by Evolve Bank & Trust. Brokerage accounts and cash management programs are provided through Synapse Brokerage LLC (“Synapse Brokerage”), an SEC-registered broker-dealer and member of FINRA and SIPC. Additional information about Synapse Brokerage can be found on FINRA’s BrokerCheck. By participating in a Synapse cash management program, you acknowledge receipt of and accept Synapse’s Terms of Service, Privacy Policy, and the applicable disclosures and agreements available in Synapse’s Disclosure Library.

Investment advisory services are only provided to clients of YieldStreet Management, LLC, an investment advisor registered with the Securities and Exchange Commission, pursuant to a written advisory agreement.

Our site uses a third party service to match browser cookies to your mailing address. We then use another company to send special offers through the mail on our behalf. Our company never receives or stores any of this information and our third parties do not provide or sell this information to any other company or service.

Read full disclosure