Over the last ten years, the investment landscape has changed dramatically. There has never been a better time to access investment products that were once only available to the super-rich and powerful. Yieldstreet strives to deliver income-producing, innovative products with a low correlation to the stock market. With assets backed by collateral and a relatively short investment duration, YieldStreet is offering a powerful combination of features for investors.
Founders Michael Weisz and Milind Mehere created a way to diversify away from the stock market and invest in assets classes with steady cash flow and passive income streams. Large private equity firms and hedge funds have always had access to investments such as these. Individual investors had a tougher time finding options, so Michael and Milind founded YieldStreet in 2015.
YieldStreet offers investors the chance to invest in asset-based investments that were previously unavailable. With a minimum investment of $5,000, users target a variety of products with yields ranging from 6 percent into the double-digits.
YieldStreet connects investors to fixed-income alternative investments in real estate, commercial and consumer financing, and litigation. Over $1 billion has been invested on the platform since 2015. Income generation is the goal for many investors, but finding products with low investment minimums is a challenge. Buy a house and collect monthly rent. You have just created an income-generating product for yourself. However, a large amount of cash required to purchase a home is a problem for many investors. Finding a tenant, maintaining the house, and collecting rent are a few other details you are now responsible for in your newly created income-generating machine. Companies like YieldStreet take care of all the hassles for you.
Why not just invest in dividend-paying stocks in the public stock market and be done with it? You might be asking yourself. Good question. Public stock market investing features income generation in the form of dividends. So why does YieldStreet think they can beat the stock market? They don’t. Well, I’ve never heard YieldStreet make a claim they can beat the stock market, and I’ve never heard them compare their yields to stock dividends. They are two different animals.
The facts are that many investors are already exposed to the public stock market through their brokerage accounts and 401k retirement accounts. Investors may already have income generation occurring inside those accounts from dividend-paying stocks. There’s nothing wrong with that, some of the best investments in history have been from long-term ownership of dividend-paying public equities. Warren Buffett can explain this if you’re not familiar. One of the goals with YieldStreet is to diversify away from the public stock market.
Low Stock Market Correlations
Everyone wants to be non-correlated with the stock market. It seems every new investment out there is pitching their ideas as, “non-correlated.” Why? To have a low correlation to the stock market means you don’t lose all your money when the stock market crashes. Most people are familiar with the horror story told over and over by money management gurus of the 65-year-old with one million dollars in his retirement account and no other assets. This unlucky person was just about ready to announce his retirement when the market suddenly plummets, and he loses half his life’s savings. Now retirement is impossible.
“This is why you need investments that are not correlated to the stock market,” the storyteller would say. Marketing firms understand that a large percentage of people with investments hold that money in the stock market through 401k accounts. The typical investor feels the pain when the stock market goes down. If you own other non-correlated investments, you feel less pain.
YieldStreet attempts to offer vehicles with low correlations to the stock market. One positive attribute with real estate investment is that it’s harder to trade in-and-out of. Meaning, it’s less liquid and carries higher transaction costs. This is a feature, not a bug, for many investors. They are less likely to be subject to the emotional fear and greed of market ups and downs. Selling an entire building when the economy dips is much more complicated than clicking the sell button on a stock during a panic. This aspect tends to make real estate somewhat more stable than public equities.
While not perfectly non-correlated to the stock market, commercial real estate tends to perform somewhat differently than stocks. This is enough of a reason to make it part of an investment portfolio. Other ways to describe commercial real estate would be less volatile or more stable. However you want to slice it, lending backed by commercial real estate will perform differently; therefore, not 100% correlated to the stock market.
On A Roll
Recently, YieldStreet moved into a new office space on Park Avenue and 49th Street. Nearby are offices of mega-money managers such as Blackstone and Blackrock. Now, not only is YieldStreet challenging the established banking system, but they are also partnering with them. A new product with soon be available called the Prism Fund, combining the YieldStreet platform with BlackRock and some of their most experienced talent in asset management.
The company that won the best alternative investment platform at the Benzinga Global Fintech Awards last year was recently named the 14th fastest-growing private company in the U.S. by Inc. magazine. From its purchase of Athena Art Finance from the Carlyle Group for $170 million late last year, development of the YieldStreet Wallet, and raising $62 million series B funding round, the company is on a roll.