What to expect during the lifetime of an investment
You just put money to work in one of our investment offerings. What happens next? Over the lifetime of an investment, you may see money flowing back into your account not only in different dollar amounts but also in varying time intervals. In this article, we’ll explain why this occurs.
Earning Interest
Once your investment is marked active in your portfolio, it begins earning interest. Accrued interest is interest that an investment is earning, but has not paid out yet. Depending on the type of offering, you could be paid your accrued interest monthly, quarterly, on an event-based basis, or upfront.
Fund Expenses
Depending on the offering structure, a flat annual fund expense will be paid from interest that you’ve earned. Once this expense is satisfied, future interest distributions are made directly to your account. Read more about fund expenses orwatch our video that describes the process.
Interest Payments
Some of our offerings have predefined payment schedules that pay interest monthly or quarterly. Although your investment is earning interest daily, that interest is distributed to you during defined intervals. It is important to note that the timing of payments each month may vary by as many as 30 days. This lag is attributed to processing time (funds must flow from the Borrower to the Originator, to Yieldstreet, then processed to investors), and each underlying Loan’s payment grace period as outlined in the underlying loan documents. As an example, please review this infographic on receiving payments for real estate offerings.
Some offerings have event-based payment schedules. Event-based payments are most commonly associated with legal investments offered on the Yieldstreet platform. “Event-based” means that investors receive payments following an “event” — i.e. when individual cases within a portfolio settle (this is also called a “settlement event”). Those payment dates and amounts cannot be pre-determined because the timing of when cases will settle in court is unknown.
When investing in a portfolio of multiple cases, an investor can expect to receive several different payments throughout the targeted length of the investment, depending on the rate of settlement activity. Sometimes several settlements may occur in the same month and trigger multiple payments, other times there may be longer periods where no settlements occur and therefore no payment distributions are made. Similar to Real Estate payments, event-based payments take time to be received and processed, it can take roughly 11-17 business days in processing. This infographic outlines how cash flows from the litigation funding company to Yieldstreet investors, for additional details.
Further, some investments, most commonly short-term Marine investments, may make a single upfront interest payment for the duration of the loan. It’s important to read the details of each individual investment to understand the expected payment schedule. Typically, this type of upfront interest investment with a 6-month duration has a maturity date that is 180 days (6 months) from the funding date. The funding date is when Yieldstreet funds the investment. Investors will receive interest from the date their investment became active to the date of maturity, which may be less than the full 6-month target duration stated.
Principal Payments
Depending on the investment structure, you may also receive principal payments during the lifetime of an investment. In a litigation portfolio, for example, this can occur after a settlement event when proceeds are distributed to investors. It is important to note that interest accrues on the entire outstanding principal balance of the portfolio of advances or cases. The breakout of principal vs. interest paid will depend on how much interest has accrued on the overall portfolio at the time a case (or cases) settle. This infographic outlines the repayment of interest and principal.
In a real estate offering that consists of a portfolio of multiple loans, the individual loans often have varying maturity dates. For example, if there are two distinct loans in the portfolio, Loan A may be set to mature in 10 months and Loan B may be set to mature in 12 months. So, investors should expect to receive a portion of their principal back after 10 months and the remaining outstanding principal after 12 months. It is also important to note that there is a chance that the borrower could pay back in full, or a portion of the loan, sooner or later than its expected maturity. This is the nature of bridge loans. The maturity dates of all loans included in a portfolio are always outlined in detail in the offering’s Investment Memorandum. The Investment Memorandum is available to download on the offering page, and is also accessible in your portfolio for any active investments.
Offerings at Yieldstreet can have predefined interest payment schedules or payments with varying intervals. Similarly, principal may be returned throughout the term of the investment, with the remaining principal balance continuing to accrue interest until maturity. It’s important to understand the payment structure of each individual offering. These details can be found in the Investment Memorandum or Series Note Supplement which is posted to each investment’s offering page.
For more information check out Yieldstreet Resources.
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).
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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 net annualized return, using an internal rate of return (IRR) methodology, with respect to the matured investments shown in your Portfolio experience, utilizing the effective dates and amounts of subscriptions and distributions to and from the investments, net of management fees and all other expenses charged to the investments.[read more]