GP Stakes Strategies Could Generate 15% Annual Cash Yield: Yieldstreet

Yieldstreet this week announced a new private equity strategy that offers retail investors the opportunity to gain exposure to direct equity investments in alternative asset managers.

In a statement, Yieldstreet said an alternative asset manager, such as a private equity firm, is itself a business, and may have the potential to be a very profitable one due to the recurring annual revenues it earns through management and incentive fees. Investing in the asset managers or general partners themselves, a strategy known as GP stakes investing, can allow investors to benefit from strong cash flows as well as the potential for growth from increased investor in-flows.

Among the many GP stakes strategies, investments in mid-size managers are becoming increasingly attractive as mid-size managers represent a larger opportunity set with more than 10 times the number of targets relative to the larger manager segment. According to Oxford Financial Group, investment in such firms is projected to generate investors an eight – 15 per cent annual cash yield and an overall gross 2.5–three times the multiple of invested capital, which is expected to be higher than returns earned via an investment in a large-size manager.

“Over the past few years, the amount of capital raised for GP stakes investing was the highest on record, exceeding $23 billion,” said Michael Weisz, founder and president of Yieldstreet. “Equity ownership in alternative asset management companies has created tremendous wealth opportunities as demand for alternative assets continues to grow.”

Investing in private equity and private credit managers has been rapidly expanding as many well-known investors, including Blackstone, Bonaccord Capital Partners and Goldman Sachs, are continuing to raise funds and asset managers seek operational capital to support their growth.

“We’re excited that Yieldstreet is continuing to diversify their offerings and expand beyond just growth equity to include other strategies that have historically provided significant wealth creation,” said Ajay Chitkara, managing partner at Bonaccord Capital Partners, a subsidiary of P10 Holdings.

Investment professionals at Bonaccord have structured and made direct investments in $400 million in early stage equity investments into alternative asset management companies.