• Quarterly coupon payments, downside protection
• Improved risk/return profile relative to equities
• Transparent selection criteria
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Invest in a diversified portfolio of structured notes, featuring underlying stocks Roku Inc (ROKU), Paycom (PAYC) and General Motors (GM). The portfolio is expected to provide regular coupon payments and downside protection. Globally, the structured notes market is approximately $3T in size, with most major banks participating in their issuance. Until now, accessing structured notes has required investment minimums of approximately $250K per note. True to our mission, Yieldstreet makes it accessible at a fraction of this minimum.
Structured notes are hybrid securities that are issued as debt, but whose outcomes are tied to the performance of an underlying stock. Each individual structured note is expected to pay a quarterly coupon, while providing downside protection from stock declines.
Diversified Portfolio XI will initially invest in 3 individual structured notes each referencing a different underlying stock that meets the selection criteria, diversified by multiple sectors. Each structured note’s issuer is expected to be from a pool of major banks including Goldman Sachs, Morgan Stanley, JP Morgan, Citi, Bank of America, Barclays, Societe Generale, Credit Suisse, HSBC, Royal Bank of Canada (RBC), and TD Bank.
The portfolio will seek to mitigate some of the downside risks associated with owning a stock. The portfolio will seek to generate a target net yield to investors of 12-13%, but may be above or below the range given the performance of each structured note. The portfolio has a target initial maturity of 2 years with one 12-month extension option.
Please refer to the Private Placement Memorandum in the Resources section for more details about this offering.
How it works
How do structured notes work?
A structured note is a debt security issued by major financial institutions. Its returns are linked to the performance of an underlying stock. For structured notes, on each observation date , performance of the underlying stock is measured (as of the closing price on each observation date) relative to its strike price. If the performance of the underlying stock on an observation date is equal to or above its downside protection value, then the investor will earn their coupon for that period. If the performance on the observation date is below its downside protection value, then the investor will not earn their coupon for that period.
At maturity (final observation date), if the underlying stock is at or above its downside protection value, then the investors will earn their coupon for that period and receive their full principal back. If the performance on the final observation date is below its downside protection value, then the investor will not earn their coupon for that period and will receive less than their full principal back. In this scenario, the amount of original principal will be reduced by the percentage decrease the underlying stock value fell relative to its strike price.
Additionally, the issuing bank reserves the right to call the structured note early on any observation date after the call protection period.
Please refer to the Private Placement Memorandum for additional definitions and components of structured notes.
How do I get paid?
Diversified Portfolio XI will initially invest in 3 individual structured notes, each referencing a different underlying stock. The portfolio will target structured notes expected to help generate a target net annualized yield of 12-13% to investors. Each structured note will have varying characteristics, including yield (coupon), downside protection value and strike price. As such, performance for the portfolio will be calculated on a weighted basis of the performance of each structured note.
Each structured note is expected to have a term of 2 years and in the event that any note gets called by the issuer during the investment period, which will last up to 12 months, it is expected to be reinvested in a new structured note.
How are the notes chosen?
Each structured note purchased in the portfolio will follow a transparent process that requires each underlying stock and note to meet certain criteria. The goal of this process is to ensure that the underlying stocks have fundamental and technical characteristics at the time of selection that are expected to minimize the likelihood of any significant price decline. In addition, each structured note will be chosen to provide a certain minimum amount of downside protection and from a select list of major banks.
Below is an overview of some of the criteria that must be met in order to be eligible for consideration. Please see the Private Placement Memorandum for complete details.
Selecting the notes
Target net yield
First year expense
Annual flat expense
Investing in private markets and alternatives, such as this offering, 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.