by Yieldstreet | Staff
After deciding on assets that we want to offer–whether a set of legal cases or a series of real estate properties, Yieldstreet must utilize a legal investment structure for those assets.
An SPV—also called a special purpose entity (SPE)—is an investment structure that is technically a subsidiary of the company that created it. That means it is reported on a separate balance sheet, has a scope that is just a subset of the parent company’s activities and is financially independent of the parent company and from other SPVs under the parent’s umbrella. Essentially, each investment structured as an SPV is its own limited liability corporation (LLC).
In the case of Yieldstreet investments, Yieldstreet is the parent company. We set up a new subsidiary—a new SPV—each time we add a portfolio to our marketplace. Investors who choose that portfolio are pooled into the SPV. Yieldstreet acts as the managing member of each SPV, which in the simplest terms means we service and distribute the funds and inform investors of any important administrative matters. If any complications arise in the portfolio, Yieldstreet, as managing member, will handle them. Usually, though, the SPV operates in “auto mode” and, once formed, simply runs as initially outlined.
SPVs are able to operate in “auto mode” in line with investors’ expectations because each SPV is formed with a clear and limited scope. Additionally, investments in Yieldstreet’s SPVs are never recycled—which means that in addition to having a limited scope, they have a strictly limited timeline. As soon as enough litigation within a portfolio settles to pay out all principal and interest owed to investors or all real estate principal within a portfolio is paid down, the associated SPV closes. We refer to this as self-amortization: each time there is a principal pay-down, the SPV “amortizes” and gradually fades away until it naturally closes and investors’ initial capital and returns are released back to them.
SPVs are far from new. In fact, many types of companies have used SPVs extensively for three decades. Because SPVs operate independently of their parent companies, they can be effective tools for managing risk. Financial institutions and private businesses regularly use SPVs to finance and trade assets ranging from cars to homes to college tuition to industrial equipment. Some governments have even used SPVs to set up public-private partnerships for crucial but expensive projects like infrastructure revitalization.
Our decision to structure investment offerings this way hinged largely on two key features of SPVs: clarity and bankruptcy remoteness. What do these benefits mean for you as a current Yieldstreet investor or someone considering adding Yieldstreet investments to your portfolio?
First, because all capital is funneled directly into a select SPV, as an investor you know exactly where your money is going. Each SPV is created for the specific and limited purpose of funding the alternative assets listed in a single portfolio. That opportunity is completely independent of other portfolios on our marketplace, so you can be sure that your money is financing—and your returns are dependent upon—only the assets that you personally chose to participate in. Further, you have certainty about the events that will trigger the release of your capital and returns. Because each SPV is self-amortizing, money will never be recycled unless you actively choose to keep your money at work and reinvest your funds into a new portfolio. Instead, as soon as the portfolio’s principal is fully paid down, the SPV ends and the money therein is released.
Second, and most importantly, each Yieldstreet SPV—is bankruptcy remote from both Yieldstreet as a whole and from other opportunities that we offer. In other words, the default risk on an SPV extends only so far as that SPV’s underlying assets; the SPV does not absorb any default risk from Yieldstreet or from assets grouped into other opportunities. If anything ever happened to Yieldstreet, Yieldstreet would simply forfeit its role as managing member to another investor in the portfolio, and the SPV would continue to generate interest and self-amortize as planned.
While the SPV structure is, in many ways, beneficial to Yieldstreet investors, it places certain limitations on our investment process. For example, because each SPV is its own LLC (Limited Liability Company), Yieldstreet is currently limited to accept no more than 99 investors in an investment opportunity, per SEC restrictions. This cap, which is commonly known in the crowdfunding world as the “99 Investor Problem”, has been in place since the 1940’s. Fortunately, there is currently legislation being reviewed to raise it to 500 investors.
Next time you consider investing, keep these attributes of SPVs in mind. At Yieldstreet, we believe that SPVs are a good way to offer innovative, high-quality investments while keeping investor risk to a minimum.
Sign up with your email address
Securely verify your identity and link a bank account
Verify your accreditation (if applicable) to access all of Yieldstreet’s offerings.
Our weekly podcast providing ideas about how to make money work for you and bring you closer to your dreams.
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.
2 Represents a net estimated, unrealized annualized internal rate of return (IRR) of your portfolio and is based by reference to the effective distribution dates and amounts to and from the investments, as well as any outstanding principal and accrued and unpaid interest as of the current date, after deduction of management fees and all other expenses charged to the investments.[read more]
3 "Annual interest" or "Annualized Return" represents an annual target rate of interest or annualized target return and "term" represents the estimated term of the investment. Such target interest or target returns and estimated term are projections of the interest or returns and or term and may ultimately not be achieved. Actual interest or returns and term may be materially different from such projections. This targeted interest or returns and estimated term are based on the underlying investments held by the applicable.
4 Reflects the initial quarterly distribution declared by the board of directors on February 6, 2020, which will be payable to stockholders of record as of June 10, 2020, and the initial offering price of $10 per share.
5 The Fund will cease investing and seek to liquidate the Fund's remaining portfolio no later than 48 months after the Fund's initial closing. It may take up to twelve months thereafter to fully monetize any remaining illiquid investments in the Fund's portfolio.
6 Represents the sum of the interest accrued in the statement period plus the interest paid in the statement period.
7 The internal rate of return ("IRR") represents an average net realized IRR with respect to all matured investments 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 Sept 6th, 2021, after deduction of management fees and all other expenses charged to investments.
8 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.
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. 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 therefor.
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 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.
Banking services are provided by Evolve Bank & Trust, Member FDIC.
Investment advisory services are provided by YieldStreet Management, LLC, an investment advisor registered with the Securities and Exchange Commission.
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.