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Citi strikes deal to offer hedge fund-like investments to the masses

Citigroup is teaming up with an online platform to make credit investments normally reserved for hedge funds and billionaires available in small slices to legions of individual clients.

A partnership announced by the bank and YieldStreet on Wednesday will make about $2 billion of assets available to the platform’s mass affluent investors, according to people with knowledge of the deal’s size. Citigroup will make the investments available over the next 24 months, said the people, who asked not to be identified discussing confidential terms.

YieldStreet, which has 300,000 so-called accredited investors on its platform, provides users with educational materials and opportunities to buy pieces of investments that can boost returns but have been known to bedevil even Wall Street professionals. By partnering with the platform, Citigroup will get a better understanding of the market’s potential.

“Retail investors could become a mainstream buying force in this alternative-credit space,” said Matt Zhang, the bank’s global co-head of structured credit and securitized product trading. The YieldStreet partnership “will give us the insight to know what type of product is not only attractive for typical institutional investors but also to an emerging retail space.”

Historically, experts have worried about retail investors in private credit because the assets can be illiquid and unusual. YieldStreet CEO Milind Mehere said the firm will provide detailed information on every investment.

YieldStreet has funded roughly $1.3 billion in investments across asset classes such as real estate, litigation finance and marine. The firm also announced on Wednesday that it renewed a warehouse facility with Soros Fund Management, and boosted it to $250 million from $100 million — a move that will help fund investments in private credit.

“Along with the other large institutions that we’re talking to now, I think 2020 will be a year where we see a lot more people join YieldStreet,” Michael Weisz, president of the firm, said in an interview. “It’s also a testament to how the company has grown and that it’s now ready to partner with the Citi’s of the world.”

Citigroup is backing the partnership through its Spread Products Investment Technologies group, or Sprint, which is led by Zhang. The group has backed firms including Better Mortgage and Factory_OS.

Bloomberg News