Wealth startup YieldStreet just nabbed backing from Citi and inked a deal to sell billions in private-credit and structured products to the mass affluent crowd
- A fintech investment group within Citi is backing YieldStreet, which bills itself as a digital wealth management firm that brings alternative investments to the masses. In November, that unit also invested in George Soros and Peter Thiel-backed fintech Trumid Financial, an electronic-trading platform for corporate bonds.
- The two firms are also partnering in a deal to bring private credit as well as structured-credit products to YieldStreet's users.
- The partnership underscores digital wealth and investing startups' efforts to open up complex and exotic products beyond Wall Street's big-money investors.
- And all the while, investors big and small have been on a frantic search for yield thanks to years of ultra-low interest rates.
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Customers relegated to the "mass affluent" set - those on the lowest end of the high-net-worth spectrum - will now have access to a even wider menu of investments beyond just stocks and bonds.
A fintech investment group within Citi is backing YieldStreet, which bills itself as a digital wealth management firm that brings alternative investments to the masses.
The two firms are also partnering in a deal that lets YieldStreet users tap into private credit markets for real estate, aviation, shipping, and telecoms, as well as get access to other structured credit products.
The startup will get access to $2 billion in investments originated from Citi over the next 24 months, according to a person familiar with the matter.
YieldStreet already offers exposure to alternative investment areas including loans collateralized by shipping vessels, works of art, and legal settlements.
The strategic partnership, which is YieldStreet's first, underscores young fintechs' efforts to open up sophisticated products and digital wealth management to customers beyond Wall Street's big-money investors. It also highlights pushes by larger, more institutionalized financial services firms' pushes to back digital investment platforms.
And all the while, investors big and small have been on a frantic search for yield thanks to years of ultra-low interest rates.
"My personal dream, what I wake up for everyday, is to walk around and have any person, be it for $5, $500, $5 million, or $50 million invested in the same product and have the same opportunity," Michael Weisz, president of YieldStreet, said in an interview.
Citi is backing YieldStreet through a fintech investment unit within the bank, which formed in 2018 and is geared toward startups in the debt and private credit markets. In November, that unit also invested in George Soros and Peter Thiel-backed fintech Trumid Financial, an electronic-trading platform for corporate bonds.
The YieldStreet deal's financial terms were not disclosed.
For now, investments offered by YieldStreet, which oversaw some $345 million in assets in November per a regulatory filing, are only accessible to accredited investors who have to prove a level of income, or net worth.
The minimum income requirement for investors is $200,000 per year for the past two years as an individual, or $300,000 per year if the user has a joint account. Alternatively, users are required to have a net worth of $1 million, excluding the value of their primary residence.
But the startup, which also has offices in Brazil, Argentina, and Greece, is trying to place alternative investments in more users' hands. It's "actively researching ways that we can open up our investment offerings to all users, regardless of accreditation status," the company said on its website.
Given the risks that can come with smaller individual investors investing in sophisticated investments, Weisz said YieldStreet aims to educate investors with a team of experts on-hand and digestible educational literature.
"Give a webinar, video, infographics, multimedia, produce the information in a way that people like me and you are used to reading information in today's day and age," he said.
"People have to understand and recognize that investing anywhere, be it in the stock market, be it in bonds, be it on YieldStreet, has inherent risks to it and you should - you must, I do - read the investment materials, understand what they are, and ask questions if you don't," Weisz added.
The company is backed with $178 million in equity and debt funding from firms including Edison Partners, Greycroft, and Raine Ventures, in addition to a warehouse facility from Soros Fund Management. Soros has upped that line of credit from $100 million to up to $250 million, YieldStreet said on Wednesday.
YieldStreet, which has some 300,000 users, raised a $62 million Series B round in early 2019 with investment from Edison Partners, Greenspring Associates, and Soros Fund Management.
YieldStreet has also main inroads to expand its wealth offerings, while still holding true to its alternative investments core.
Last month, YieldStreet acquired WealthFlex, a digital retirement planning tool that gives users access to private investments - including a range of alternative assets including art finance and commercial loans - through self-directed IRA accounts.
- Dan DeFrancesco contributed reporting.
