Risk is one of the key components of investing. Each opportunity comes with its own risk or combination of risks. To fully assess an investment opportunity, it is necessary for investors to understand how associated risks could affect the safety of their investment and any potential gains. Below are some common types of risk that can be associated with alternative investments.
The loan-to-value ratio is the ratio of a loan to the value of the financed asset. (e.g., a $5M loan taken out on an asset valued at $20M will have a 5/20, or 25% LTV) When a loan for an amount is at or near the appraised value of an asset, the loan-to-value ratio is deemed high. If a creditor ever has to sell the asset to recoup the investment, as in the case of default or foreclosure, high LTV ratios carry an increased likelihood that the sale amount may not be enough to cover the outstanding principal loan balance.
Default risk is the risk that the borrower will not be able to repay the associated interest and principal on a particular loan. Essentially all lending carries some default risk, but there are a few ways to try and mitigate default risk. A traditional way is to look at the recovery rate, or the amount an investor can expect to get back if a default happens. YieldStreet works with originators who have a proven track record of success and recovery rates in case of downturns to try to mitigate any default risks.
The easiest way to explain concentration risk/diversification risk is the old saying, “Don’t put all your eggs in one basket.” There are many ways to be exposed to concentration risk. Investing all resources in the same industry, geographical region, or type of investment instrument (eg. only investing in coastline construction) could carry concentration risk. The best way to counteract this type of risk is to aim for a diversified investment strategy by putting investments in different “baskets”. Most individual YieldStreet investments are packaged into portfolios that are diversified geographically (in the case of real estate), across case types (in litigation funding), and in other ways. You can also diversify across different types of asset classes by investing in different opportunities through YieldStreet.
Market (asset) liquidity risk is the chance of being unable to sell your investment when you desire, at a fair market price. The liquidity of assets depends on the climate and structure of the market in which the asset will be sold. Treasury bonds are usually deemed to be highly liquid investments because it is not difficult to find buyers willing to pay a fair market price for that investment. Real estate liquidity can be affected by several factors, including the number of foreclosures in the area or the willingness of banks to offer new mortgages.
Investments are often made on a “floating” timeline. This means the payout date is a target date, or an expected date, but not a guaranteed date. With event-based payments, like with litigation finance, there is always a chance the case may settle before or after the expected payout date. A default on real estate investing opportunity can increase uncertainty around a payout date. This is more an “inconvenience risk” rather than an actual risk. Many investors prefer this type of risk may be leveraged to increase the yield of an investment without the lender taking on any risk of principal loss.
Principal risk is the possibility that a lender won’t get back some or all of the principal balance, the amount that they had originally invested. YieldStreet takes a conservative strategy with investments; however, a loss is always possible. For example, if a real estate property isn’t sold for the expected amount, there is a chance of principal loss for investors in that property.
Payment frequency on a debt can be annual, semi-annual, quarterly, or monthly. The frequency of a payment can affect the price or yield (return) of an investment. For alternative investments that are closely tied to assets, unexpected increases (for example, early repayment) in the frequency of payments can reduce the return to the lender on the investment.
Higher expected returns are used to reward investors who are willing to take on more risk. Returns on invested capital are, however, never guaranteed. It is crucial to carefully weigh all the different risks that come with an investment and to understand your appetite for risk before making any sort of investment.
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" represents an annual target rate of interest and "term" represents the estimated term of the investment. Such target returns and estimated term are projections of the returns or term and may ultimately not be achieved. Actual returns and term may be materially different from such projections. These targeted returns and estimated term are based on the underlying agreement between the SPV and borrower or originator, as 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 January 8th, 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.