*This post is a part of a series of posts we have written. To start from the beginning, click [HERE].
It’s a difficult time to earn yield on investments without going uncomfortably up the risk curve.
Many managers have reacted by:
- Investing more heavily in alternatives
- Going up the risk curve
- Getting more comfortable with leverage
- Trying to get more creative/complicated
- Incubating their own investment ideas
At CoVenture our approach has been to try and stay simple by looking where others aren’t.
And we believe esoteric asset backed lending opportunities allow us to invest in (a) borrowers with very low default rate profiles, who (b) don’t have access to traditional credit markets and so are therefore willing to pay high rates.
We try to win these deals by:
- By looking where others aren’t: being in multiple asset classes allows us to take a cross-disciplinary approach to investing — seeing obvious opportunities where others aren’t looking.
- By being good partners: this blog series and everything else we try to do as a firm come from the spirit of partnership. We try to be fair to our borrowers, building us a strong reputation, and making us an attractive financing partner.
- Applying traditional asset-backed lending formulas to new areas: Looking in new pockets does not mean we forget what we’ve learned in more traditional credit areas.
We think this approach will start to be practiced by more and more firms who are realizing they need to stretch out of their comfort zones to earn the returns their LP’s demand.
They’ll soon realize an easier way to earn those returns is by building a new product — and it will require building a new type of an investment firm.
The hallmarks of tomorrow’s investment world are: cross-disciplinary, creative, transparent, and partner oriented. The firms that will thrive will embrace complexity and will work with origination platforms who build moats around the products they finance.
We hope this series has been helpful for anyone reading — and we’re very reachable.
Please feel free to ping myself, Brian or Marc at [firstname]@coventure(dot)vc
For the Full Series of Posts, Please See Below:
(1) Part 1: An Intro to Online Lending (LINK)
(2) Part 2: An Intro on How To Source Deals [LINK]
(3) Part 3: Initial Diligence [LINK]
(4) Part 4: Deeper Diligence [LINK]
(5) Part 5: Structuring The Deal [LINK]
(6) Part 6: Building a Credit Model [LINK]
(7) Part 7: Monitoring Your Investment [LINK]
(8) Part 8: Conclusion [LINK]