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Private Equity Strategies

iBlockchain Bank & Trust Plc Private Equity Strategies

1. Real Estate

Private equity real estate involves pooling together investor capital to invest in ownership of various real estate properties. Four common strategies used by private equity real estate funds are:

  • Core: Investments are made in low-risk / low-return strategies with predictable cash flows.
  • Core Plus: Moderate-risk / moderate-return investments in core properties that require some form of a value-added element.
  • Value Added: A medium-to-high-risk / medium-to-high-return strategy which involves the purchasing of property to improve and sell at a profit. Value-added strategies typically apply to properties that have operational or management issues, require physical improvements or suffer from capital constraints.
  • Opportunistic: A high-risk / high-return strategy, opportunistic investments in properties require massive amounts of enhancements. Examples include investments in development, raw land, and mortgage notes.

2. Growth Capital

Growth capital investments are made in mature companies with proven business models that are looking for capital to expand or restructure their operations, enter new markets, or finance a major acquisition. Typically, these are minority investments, and companies that take on growth capital are more mature than venture-funded companies. Such companies generate revenue and profits that may not be enough to fund big expansions, acquisitions or other investments. While growth equity may sound similar to venture capital and control buyouts, there are some key differences.

3.  Tokenized Mezzanine Financing

While some companies might take on growth capital to finance their expansions, tokenized mezzanine financing is an alternate way. Tokenized Mezzanine financing consists of both debt and equity financing used to finance a company’s expansion. With tokenized mezzanine financing, companies take on debt capital that gives the lender the right to convert to an ownership or equity interest in the company if the loan isn’t repaid in a timely manner and in full. Companies that take on mezzanine financing must have an established product and reputation in the industry, a history of profitability, and a viable expansion plan.

 

A key reason why a company may prefer mezzanine financing is that it allows it to receive the capital injection needed for business without having to give up a lot of equity ownership (as long as it’s able to pay back its debt on time and in full). Another advantage of taking on mezzanine financing is that it may be easier to receive traditional bank financing since it’s treated like equity on a company’s balance sheet.

 

On the risk side, there are some disadvantages to companies that take on mezzanine financing. Since mezzanine financing is not collateralized, the lender takes on greater risk. Therefore, mezzanine financing is typically conducted by unconventional lending institutions versus standard lending institutions. As a result, interest rates and terms can be much higher than traditional debt financing.

4. Fund of Indexes

A “fund of Indexes” (FoI) is an investment strategy whereby investments are made in Crypto Indexes rather than directly in tokenized securities, tokens, or altcoins.

By investing in a fund of indexes, investors are granted diversification and the ability to hedge their risk by investing in various fund strategies. Fortunately, funds of indexes are a great opportunity because investors are not subject to an additional layer of fees. In addition, no management fees or performance fee are charged at any underlying fund level, neither do investors have to incur additional fees at the FoI level.

One such Index is the Token Industrials Average (.TIA) More Details

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