I started investing on Yieldstreet about a year ago because I liked the unique investment offerings the company had. I invested in a pool of litigation finance loans, something I had never done before. Since then Yieldstreet has added some more unusual investments never before offered in marketplace lending. For more on Yieldstreet you should listen to my podcast from last year with CEO Milind Mehere.
I caught up with Milind again this week to talk about these new offerings and also to get an update on Yieldstreet’s progress. The first thing I wanted to talk about was the two unique investments they recently had on their website for marine financing. I should also note that Yieldstreet is available only to accredited investors at this time.
A First for Individual Investors: Marine Financing
First, let me tell you what marine financing isn’t. It is not recreational boat financing as Milind was quick to point out. These are commercial ships or to be more accurate Dry Bulk Ships designed to carry goods such as grain, coal, metals or forest products.
Yieldstreet purchased two vessels to be leased by a European ship management company. This is a somewhat complicated deal structure that Yieldstreet explains nicely in this tutorial on their website. In their first transaction they offered 8% interest on a 36-month loan term. The minimum investment was $20,000 and they filled the $18.1 million deal with just over 500 investors, many of whom had never invested on Yieldstreet before.
To give investors protection in this deal Yieldstreet purchased an insurance policy called Residual Value Insurance that covers the full value of the ships for the duration of the 36-month term. Investors are expected to earn monthly interest payments throughout the loan term. Principal is expected to be repaid at the end of the loan term under one of several scenarios explained in the offering.
A subsequent deal from Yieldstreet introduced me to the concept of vessel deconstruction. This deal paid 10.25% over a 24-month term and Milind proudly shared that this $12.5 million deal was fully funded in less than 20 minutes.
This deal was for a loan facility that several vessels will pass through in the duration of the loan term. A typical vessel is deconstructed and sold for scrap steel and parts within 120 days. The facility will take a security interest in each vessel thereby limiting downside risk.
Diversification, High Yield and More
There are two things I really like about Yieldstreet. They offer some of the highest yields in the industry and they offer unique investment opportunities. But I do have some issues that I shared with Milind.
First, the minimums are too high per investment. Minimums range from a low of $10,000 to over $100,000. I have a few thousand dollars sitting in my account now that I can’t deploy because the minimums are so high.
Second, the deals can fill very quickly and it is easy to miss out if you don’t login at exactly the right time. In trying to invest in my first litigation finance deal I missed out on a couple of previous offerings because I was not quick enough.
Milind said that both of these issues are being addressed. They are looking to offer a diversified funding vehicle that will invest in 10% of each deal and it will have a low minimum. That should launch before the end of the year. On the second issue, like many platforms, they will offer an automated investment option shortly.
One other new development Milind shared with me is that they are working towards offering interest on cash balances held in Yieldstreet accounts. They are working with a bank right now and hope to be able to offer interest of around 0.75% on cash balances in the near future.
As we were wrapping up Milind shared that Yieldstreet is all about finding inefficient sources of capital. You will not find standard offerings on their platform that are available at other platforms. They want to create value by offering their investors unique opportunities that pay a high yield and get more retail investors access to the same wealth creation opportunities that the top 1% enjoy.
They have recently crossed $375 million invested on their platform and they now have over 50,000 users. They have a very diverse and engaged investor base and as they scale they are looking to serve many more investors.
For the marketplace lending industry Yieldstreet fills a unique niche. There is a lot to like with their high yield uncorrelated investments. And with the improvements they are making I expect they will continue to grow and will keep attracting new investors.
Peter Renton is the chairman and co-founder of Fintech Nexus, the world’s largest digital media company focused on fintech. Peter has been writing about fintech since 2010 and he is the author and creator of the Fintech One-on-One Podcast, the first and longest-running fintech interview series.