Yieldstreet’s Structured Notes can help investors navigate choppy markets
Key Takeaways:
- An increase in inflation, rising rates and geopolitical risk triggered volatility in public markets.
- Structured Notes, which often have eligibility requirements, are a hybrid of fixed income and equity securities, can help provide investors with attractive cash flow, while adding a layer of downside protection.
- Yieldstreet’s Structured Note offerings include both income and growth notes, with a focus on “defensive” sectors and large caps that are less likely to fluctuate than the broader market.
For the past year, soaring inflation, tighter monetary policy, and unprecedented geopolitical risk triggered an increase in volatility in the equity and fixed income markets. Meanwhile, rapidly increasing rates are also causing a slowdown in economic growth, and may eventually spur a recession.
Amid a challenging environment for public markets, alternative assets can be a potentially attractive opportunity for investors to increase their portfolio diversification and potentially enhance returns.
Structured Notes are an opportunity for investors to potentially earn more stable returns while equity markets struggle to find a direction.
Structured Notes are a hybrid vehicle with returns tied to an underlying asset’s performance. They can be pegged to single stock performance, index performance, commodity, or to an underlying asset. The return is contingent on the stock price staying above the strike price, and can target a fixed yield (income notes) or upside (growth notes).
Learn more about how Structured Notes work.
Better potential downside protection
Current market conditions can be challenging, but they can also offer a conducive environment for Structured Notes. The S&P 500 is down 24% year-to-date as of October 13, so strike prices are currently low for new Structured Notes. Amid elevated volatility, Yieldstreet is able to negotiate higher protection thresholds compared to nine months ago. We have already increased the minimum barriers to 30% for all Structured Notes, and our goal is to continue to increase them.
Defensive characteristics
Although predicting which stocks are going to be “downturn-proof” is a fool’s errand, we are keeping tabs on specific sectors and companies that we believe will remain resilient despite the economic uncertainty, namely:
- Defensive industries: We are focussed on industries and sectors that have defensive characteristics, such as consumer staples (Walmart, Target, Tyson Foods, etc), healthcare (CVS, Walgreens, etc)
- Large caps: We are only selecting companies with more than $30 billion in market cap, as they tend to be less volatile on a relative basis.
- Pricing power: We are selecting companies with the ability to pass on rising costs to their customers in this inflationary environment, such as Amazon, Alphabet, Starbucks, etc.
Structured Notes on Yieldstreet
We started offering Structured Notes on our platform in April 2021. Since then, we have provided maturities ranging from 9 months to 24 months, with both income and growth strategies, in different sectors and across different themes — “diversified,” ESG, and financials, to name a few.
Going forward, against the current market backdrop, our goal is to select opportunities that can allow our investors to weather different market conditions.
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]