Digital asset management startup YieldStreet’s mission to provide retail investors the opportunity to invest in assets normally reserved for billionaires and institutional investors just got a huge boost.
A partnership with Citigroup announced Wednesday will make about $2 billion of assets available to the platform’s mass affluent investors, Bloomberg reported, citing unidentified people with knowledge of the deal’s size. YieldStreet’s platform enables accredited investors to buy pieces of investments in asset classes including real estate, marine, commercial, legal, and art.
The partnership is another sign that the banking and financial sectors are seeking to join with startups that are bringing new ideas and technologies to their traditional businesses. Retail investors historically have been warned away from investments in alternative assets on concerns that they would underestimate how illiquid and unusual they can be.
YieldStreet has said it eases those concerns by providing detailed information on every investment. The New York-based company has offered more than $1.2 billion worth of investment opportunities since 2015.
“Our partnership with Citi, yet again, reflects the ongoing paradigm shift in the financial services sector, highlighting the value YieldStreet offers to investors and originators alike,” Michael Weisz, president of YieldStreet, said in a statement. The deal will enable YieldStreet investors to build portfolios beyond the “traditional composition of cash, stocks, and bonds,” he said.
Retail investors don’t have direct access to the private equity and debt market, and it’s hurting their financial prospects.
Jay Clayton, the chairman of the U.S. Securities and Exchange Commission, called individual investors’ lack of access to the private market a “growing concern” in a speech at the Economic Club of New York last September. Investors historically have earned 3 percentage points more in private equity than they have in public equity, according to Barron’s.
- Citi is set to reshape the $40 trillion debt market through its Spread Products Investment Technologies (SPRINT) program within the Citi Markets FinTech Investments Unit. In addition to YieldStreet, SPRINT partnered with New York-based credit trading company Trumid last November, exploring new ways to provide institutional clients more liquidity.
- YieldStreet raised $62 million in series B funds, led by Edison Partners, last February, bringing its total raised to $178.5 million. YieldStreet’s investment opportunties have a low correlation with the stock market, and are typically for 1-to-3 years with 8% to15% target returns.
- A handful of startups are democratizing traditionally inaccessible private investment opportunities, and venture capitalists are betting on them. Los Angeles-based investment platform PeerStreet, offering short-term, real estate backed loans, raised $60 million in series C funds last October, led by Colchis Capital Management.