Jason Ho

Jul 08, 2017

I like Yieldstreet mostly for its litigation assets, which have been returning 12-13% consistently every year. I've invested in 18 litigation offerings to date, and all are performing as expected and on time.

A typical portfolio comprises of 300-400 cases, where the minimum investment is $5-10k. This allows you to diversify across a large number of outcomes, which reduces the volatility of your returns. The case types are usually motor vehicle accidents, or slip & falls, where the judgements are already well hashed out, and thus the probability of settlement and their amounts can be modeled with some degree of accuracy (versus more complex cases, like commercial litigation, which need to be looked at case-by-case).

Portfolios are typically underwritten so that the total advance amount represents < 10% of the expected net case value, and no single lawsuit represents 5-8% of the total portfolio. Furthermore, only 10% of cases go to trial, with most settling out of court.

Before I started investing in litigation funding, I read "Investing in Justice" by Max Volsky, which I highly recommend if you're looking to understand this asset class better. 

The biggest negative is that YieldStreet doesn't provide due diligence materials for the individual cases in their portfolios. They only give you the general overview and statistics, so you have to trust either LawCash (the originator) or YieldStreet to do the proper underwriting for each case.

Overall, I like YieldStreet's litigation assets for its consistent cash flows, lack of correlation with the public markets, low counterparty risk (the obligers are usually large insurance companies), and built in diversification (< $50 invested in each lawsuit).