How to be an informed investor on Yieldstreet

March 12, 20206 min read
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At Yieldstreet, we believe that our innovative offerings help our community of investors realize their next level. It is in our company’s DNA to bring products that were typically reserved for institutional investors to individual investors like you. While we thoroughly review every offering on our platform, it is important for you as the investor to have a full understanding of the potential risks so you can make informed decisions when investing on the platform.

Here are a few things that you can do to help ensure that you are fully informed prior to investing: 

1. Familiarize yourself with Yieldstreet’s asset classes and products

Understanding the asset classes we offer is an important aspect of investing on our platform. The structure of offerings will vary among asset classes depending on the type of collateral backing an investment and the varying risks associated with each asset class.  

For example, a Marine Finance investment may be collateralized by the scrap value of a vessel, while an Art Finance investment may be secured by a pool of artwork with an aggregate value higher than the loan amount. That being said, it is also possible for two investments in the same asset class to exist with substantially different terms and conditions.  For this reason, it is incredibly important that investors thoroughly review every offering they participate in on Yieldstreet.  


2. Understand the offering before investing

When submitting an investment request on Yieldstreet, investors are, among other things, acknowledging and agreeing to the terms and conditions outlined in the legal offering documents. The legal documents for an offering on Yieldstreet will vary based on the way the offering is structured. 

Offerings on Yieldstreet can take the form of a purchase of a Borrower Payment Dependent Note (“BPDN”) or a membership interest in a Special Purpose Vehicles (“SPV”). Documents associated with Yieldstreet offerings can be downloaded from the document section on the investment offering page for your review.

Investors must read and understand all of these documents prior to submitting an investment request on Yieldstreet. 

Below is a list of documents you might see for a given Yieldstreet offering: 

  • Series Note Supplement – This is a detailed overview of the offering. It describes the terms of the investment, which includes an explanation of the underlying dynamics of the offering itself, as well as the note that will be held by the investor.  This will be available for offerings in a BPDN structure.
  • Private Placement Memorandum (PPM) – This is a legal document that lays out the general objectives, risks, and terms of the note offerings made by the note issuer. This will be available for offerings in a SPV structure.
  • Indenture and Form of Note – This is an agreement between the note issuer and the trustee specifying the features of the note issuance, such as the trustee’s security interest, servicing of the underlying investment and events of default under the note, among other things. The indenture contains the terms and conditions applicable to the note issuance. The indenture and note govern the relationship between the note issuer and noteholders (meaning the investors). 
  • Operating Agreement – This document sets out the manner in which the SPV will operate, including, in the case of an SPV offering, the rights of the investors and order of payment.
  • Subscription Agreement – This is the agreement pursuant to which the investor subscribes to either a note (BPDN) or membership interest (SPV) and makes certain representations to and agreements with Yieldstreet. For example, accredited investor status and non-circumvention.

3. Know your own risk tolerance 

Familiarizing yourself with your personal risk tolerance as an investor should give you an understanding of how to go about managing expectations of investment performance. This applies not only to your Yieldstreet investments but also extends to your overall portfolio as an investor. 

Your existing investments can give you a good idea of your risk tolerance and any decisions you make about participating in any of Yieldstreet’s offerings should fall in line with your own preferences. Here are some calculators designed to help you develop a stronger understanding of your own profile as an investor. 

It is your responsibility as an investor to determine whether the investments on Yieldstreet are appropriate based on your risk profile, and your financial goals and objectives. 

4. Consider diversification and concentration 

It is important to keep diversification in mind when considering what investments to make on Yieldstreet. Paying attention to your own investment concentration is also crucial to making informed investment decisions. An over-concentration in one asset class can expose you to a greater level of risk in comparison to spreading your capital over numerous asset classes.

Not only is it important to diversify your holdings across asset classes on Yieldstreet, but it is also important to consider how much exposure you have to one originator. The more you can spread your capital across asset classes and originators, the more you may be able to reduce the level of systematic and unsystematic risk you are exposed to. 


5. Bridge the gap between being a retail investor and understanding institutional investment products

Yieldstreet enables individual investors to access offerings that they have likely not been able to gain access to in the past. When trying to compare a Yieldstreet offering to some of the more traditional offerings available to you such as stocks or real estate, it is important to realize that these debt-based investments are not liquid like stocks, nor are they directly managed by the investor like traditional real estate investments.

Yieldstreet investments must be held by the investor until maturity and have a different payment schedule compared to say, dividends from stocks. For example, if a Yieldstreet real estate offering is expected to pay on a monthly basis, investors should not necessarily expect to receive payments on the same day each month. 

Yieldstreet offerings are also not like other illiquid alternative investments. In contrast to a real estate investment property, where the investor has full control and oversight of their property directly, there can be multiple stakeholders as well as additional moving parts involved in a Yieldstreet offering. This impacts Yieldstreet’s resolution strategy in the event of a default. It’s important to note that investors may receive limited information while a work-out strategy is being determined and executed. 

This added element of complexity requires individual investors, like yourself, to be knowledgeable and comfortable with how each offering is structured and have an understanding of any associated risks.  For this reason, you may come across concepts or terms when reviewing offering documents that are unfamiliar to you. It is essential that you understand these documents in their entirety before making the decision to invest, so we encourage you to reach out to us at [email protected] with any questions or concerns. 

6. Use our Resources and ask questions if you don’t understand something

If you come across any aspect of an offering that you do not understand or would like more information about, look up the topic in our Resource Center. Additionally, we are always available to answer any questions if you reach out to us at [email protected]

This communication and the information contained in this article are provided for general informational purposes only and should neither be construed nor 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. Any link to a third-party website (or article contained therein) is not an endorsement, authorization or representation of our affiliation with that third party (or article). We do not exercise control over third-party websites, and we are not responsible or liable for the accuracy, legality, appropriateness or any other aspect of such website (or article contained therein).