Buckets of Return/Risk Reduction
Creating Return Buckets for Risk Reduction
Many investors including HNW and UHNW individuals, pensions, and endowments choose to invest in alternatives to enhance risk reduction while still attempting to achieve suitable return objectives.
One way Warren Financial strives to help our investors is by vetting and providing a curated list of alternatives such that the target return objectives and risk characteristics of the alternative fall into various buckets – thus making planning and risk control easier and more attainable for the client.
Return “targets” and “objects” are NOT actual returns. These are the target returns which the funds seek.
Warren Safer-Equity Fund
Summary
The key advantage to the Warren Safer-Equity Fund is the unique volatility hedge employed. Utilizing the Warren Macro VIX Indicator, the volatility investment protects assets just-in time as opposed to typical ETF vol strategies that employ short, mid- term or mixed futures holdings. Warren Safer-Equity utilizes options on VIX futures in an attempt to hedge away black swan or fat tail risk.
On the long side, the Warren Safer-Equity stock selection includes both fundamental bottoms-up analysis as well as technical analysis. Warren Safer-Equity avoids companies that may not have the financial strength to continue to pay significant dividends in the future. Stocks are selected from the global pool of possibilities and from many sectors of the economic landscape.
Fund Terms
Fund Performance
WSEF: Monthly returns based on changes in the NAV as reported by administrator Alter Domus and confirmed by annual audit via Eisner Amper. Returns calculation: Compound daily changes roll up to monthly change. Annual calc: For a full year: (EndNAV/BeginNav)^(1/(#days/365) -1. For part year (not annualized): Compound daily change. Multi-year calculation: (EndNAV/BeginNav)^(1/(#days/365) -1. Dividends reinvested. After fees. See full disclosures on website. “Academic Portfolio” a.k.a, “Globally Diversified Portfolio” is a strategy we have observed in the industry. We calculated it, consisting of low cost ETFs all adjusted to include dividends 20%SPY, 25%AGG, 10%GSG, 25%VEA, 10%BIK(2008-2012), 10%IEMG(2013-current), 5%IWM, and 5%EMB after costs. The Academic portfolio is not equivalent or comparable to the SP500 or the WF portfolios because it is not comprised of the same components, specifically, the Academic portfolio includes bonds, small caps, emerging markets, commodities, etc which are not part of the SP500 nor part of the WF portfolio. All public ETF returns calculated using adjusted closes incl div after fee as reported by TD Ameritrade and/or Yahoo Finance. Benchmarks are not equal in composition or risk.
WKS Custom Municipal Bonds
Investment Focus:
Active Management
Bank CDs and Treasuries have been insufficient for conservative investors
Focus on tax free munis
Scour the $4Trillion muni bond market looking for good price and special investment opportunities
Carefully evaluate purpose, maturity coupon, state, call provisions, special circumstances
Goal: deliver more income net of fee to clients via muni-bond advantage strategy
Custom bond ladders
Taxable muni-bond ladders also available as well as Corporates
VL Fund
Summary
VCapital is an institutional-quality asset manager focused exclusively on longevity-contingent assets. Longevity-contingent assets include life settlements, synthetic products, annuities, notes, and structured settlements.
The VL Fund is a Delaware limited partnership formed specifically to invest in senior life settlements and other longevity-contingent assets. VLF is structured as an open-ended hedge fund and offers investors the ability to receive quarterly cash liquidity. The Fund seeks to preserve investor’s capital, while targeting net annualized returns between 10-14% that are largely uncorrelated to other assets classes and macroeconomic factors. With insurance providers increasing costs, recent returns have been lower, more in the range of 0-5%.
Portfolio
Life Expectancy
Fund Terms
CF 1031 Exchanges
Summary
A 1031 Exchange is a transaction that facilitates selling real estate that is held for investment. Through this transaction, you can defer the capital gains taxes that arise from the sale of real estate. Essentially, a 1031 Exchange allows you to sell your real estate property, reinvest the proceeds in “like-kind” real estate, and defer the payment of taxes on that sale.
The potential benefits from this exchange include tax deferral, diversification, tax-advantaged cash flow, and wealth preservation.
The Rules and Timing of a 1031 Exchange
For those who may not have the time, energy, or real estate expertise to find a replacement property for a 1031 Exchange, a Delaware Statutory Trust (DST) is a viable option. DST’s are recognized by the IRS as qualified replacement property for real property, and the trust holds title to the property for the benefit of many investors
DST’s offer investors many benefits:
Access to institutional-quality real estate
Professional asset and property management
Passive ownership
Non-recourse institutional financing
Lower minimum investments
Portfolio diversification
Ability to close quickly
Evaluating Benefits of Deferred Taxation
Scenarios based on estimated taxes.
PC ABL Fund
Summary
The PC ABL Fund I is a direct commercial bridge lending company with an emphasis on originating and servicing short-term commercial real estate (CRE) loans secured by first lien positions of the underlying real estate as collateral. The fund’s goal is to provide investors a transparent, risk-adjusted fixed income alternative product for further portfolio diversification. The fund provides investors with the following benefits:
Security with a focus on preservation of capital, collateral, and diversification
Steady current income, significant yield, and overall returns with mitigated risk
Portfolio diversification to complement investments in equities and bond markets
Reduced volatility in yields and income protection through significant equity positions secured by tangible real property.
Fund Terms
Fund Characteristics
Portfolio Diversification: investor capital is spread across every loan in the fund’s portfolio pro rata
Design: the fund is designed to provide a risk-adjusted, steady current income, diversified commercial loan portfolio for investors seeking safety, security, and reliable cash flows
Management: management team has over 32 years of experience, and over $1.5B in combined commercial real estate and investment banking transactions
Preservation of Wealth: in addition to the conservative LTV ratios of each loan, the fund primarily invests in income producing assets, which in the event of foreclosure should generate income until the property is repositioned for sale
PMREL Fund
Overview
PMREL Fund, LP is a diversified, multi-platform real estate marketplace lending fund. The Fund is open-ended and has no lock-ups.
The Fund’s objective is to earn a superior risk-adjusted net return with low annualized charge-off rates, while maintaining low default and annualized loss rates, from a diversified, secure real estate loan portfolio of first lien loans purchased from multiple online/Marketplace Lending Platforms.
The Fund provides high portfolio transparency, and flexible monthly liquidity, through an audited fund structure that has been successfully implemented and professionally managed by one of the most experienced teams in the marketplace lending industry.
Fund Terms
Warren Safer-Equity Fund
Summary
The key advantage to the Warren Safer-Equity Fund is the unique volatility hedge employed. Utilizing the Warren Macro VIX Indicator, the volatility investment protects assets just-in time as opposed to typical ETF vol strategies that employ short, mid- term or mixed futures holdings. Warren Safer-Equity utilizes options on VIX futures in an attempt to hedge away black swan or fat tail risk.
On the long side, the Warren Safer-Equity stock selection includes both fundamental bottoms-up analysis as well as technical analysis. Warren Safer-Equity avoids companies that may not have the financial strength to continue to pay significant dividends in the future. Stocks are selected from the global pool of possibilities and from many sectors of the economic landscape.
Fund Terms
Fund Performance
WSEF: Monthly returns based on changes in the NAV as reported by administrator Alter Domus and confirmed by annual audit via Eisner Amper. Returns calculation: Compound daily changes roll up to monthly change. Annual calc: For a full year: (EndNAV/BeginNav)^(1/(#days/365) -1. For part year (not annualized): Compound daily change. Multi-year calculation: (EndNAV/BeginNav)^(1/(#days/365) -1. Dividends reinvested. After fees. See full disclosures on website. “Academic Portfolio” a.k.a, “Globally Diversified Portfolio” is a strategy we have observed in the industry. We calculated it, consisting of low cost ETFs all adjusted to include dividends 20%SPY, 25%AGG, 10%GSG, 25%VEA, 10%BIK(2008-2012), 10%IEMG(2013-current), 5%IWM, and 5%EMB after costs. The Academic portfolio is not equivalent or comparable to the SP500 or the WF portfolios because it is not comprised of the same components, specifically, the Academic portfolio includes bonds, small caps, emerging markets, commodities, etc which are not part of the SP500 nor part of the WF portfolio. All public ETF returns calculated using adjusted closes incl div after fee as reported by TD Ameritrade and/or Yahoo Finance. Benchmarks are not equal in composition risk.
Community Bank
Summary
Community Bank in the Southeast US is undertaking a private placement of common stock to support its continued growth plans. Targeting $20 million in gross proceeds will fund significant growth opportunities in attractive markets within Atlanta, Savannah, and the Lowcountry of South Carolina.
Private equity investment opportunity in a growing bank. This opportunity is directly buying stock in a private company.
Story
4 years ago, a developing bank located in a growing segment of the low country brought in a new private equity investor. With new leadership, an acquisition in the Atlanta market, and new senior loan officers, the bank has experienced growth and expansion.
Since 2017, bank management has:
Completed a $62 million recap
Redeemed preferred stock
Cleansed troubled assets by exiting the underperforming wholesale mortgage business
Built new high performing business lines
Executed their first acquisition of a $100 million asset community bank in Atlanta
Value Traits:
Tier-1 assets to drive additional lending
Tremendous pedigree of institutional investors
Flat capital structure making the bank easy to understand, thus increasing transparency
Obvious exit plan of being sold to a larger bank within the next 3 years
Balance Sheet Summary
Snapshot
Total Assets: $1,104 million
Gross Loans: $662 million
Total Deposits: $513 million
97% Core Deposits
Total Shareholders’ Equity: $99.6 million
AVP Fund III
Summary
A pro-rata rights private VC fund that invests alongside the big names in venture during late stage rounds that are hard to access. The fund gives high net worth investors access to late stage private soon to be unicorn status companies in a risk adjusted way to play venture which 90% of HNW clients do not have in their portfolios.
Fund Terms
How does AVP select and screen the companies? The seven C’s.
C and later rounds led by new lead top tier investors
Category leaders with proven business models
CAGR of >50% at > $10M revenue
Cash flow enables path to profits
Cash on cash returns of 2-5x MOC in <6 years
Counter recessionary, essential economy companies
Colossal market size
The 7 C’s are investment objectives, not hard and fast rules.
AVP’s Portfolio
Select Capital Fund
Summary
Up to a $20 million fund with a $1 million minimum investment
Fund’s goal is to acquire 5 to 10 specific real estate projects that are diversified by asset type, geographic location, and development partner
Average project hold time of 3 to 5 years
Internal Rate of Return target of 24% based on the historical returns of the firm’s 10-year track record plus another 9% for Warren Financial customers for a total target objective of 33%
Real estate financings may include equity, mezzanine, bridge loans, and preferred equity
Investment Strategy:
Target equity investments in the lucrative middle market
Seeking real estate projects that include opportunistic ground up development, deep value-add acquisitions, and capital appreciation
High growth markets in the U.S.
Investments may include existing office, hospitality, senior living, retail or multi-family developments
Project Funded By Investors
Fund Snapshot:
Target 33% Internal Rate of Return (target 24% + 9% promote)
2.0x Equity Multiple
0% Fees
50% Share Promote
Average Hold Period of 3-5 years
Vero Beach Phase 1 (loan only)
Vero Beach Phase 1 – Closed:
Overview:
Project Indigo in Vero Beach, Florida – The “Hampton’s of Florida”
550 feet of oceanfront property on 5+ acres of land
Why?
High rate of interest being paid
20% annualized interest rate with a minimum of 8 months interest payable to each investor = a minimum of 13% rate of return
If the builder takes 1 year to pay back, the investor will be in the 20% category. If 18 months, then 30%
What?
Investing in land, not in condos
We will be loaning the builder money at a 20% interest rate so he can purchase the land. After which, he will start taking deposits from customers.
In order to repay the loan, the builder will sell villas and condos on the site
Investor Focus:
For accredited investors with non-IRA money only. About $250k starting investment.
Timing: funds needed in late February. Funds may be repaid with interest as soon as November 2020. Funds were actually repaid with interest by December 2020.
2nd lien position on the land behind Goldman Sachs
Vero Beach Phase 2
Vero Beach Phase 2:
What?
The second phase of the Vero Beach Property
Investing in the building phase of the oceanfront villas and condos
Investor Focus:
Construction Phase indicates a 31% IRR over 4 years
Investor commitment target: $100k investments
Phase 2 began in December 2020 and Vero closed the round capped at $1.3m from Warren investors and a total of $4.7m overall
Pre-Public IPO Target Companies
SpotHero:
Mission: “By designing better ways to find, reserve and pay for parking, we make life easier, our cities more accessible, and our world more connected.”
As the #1 downloaded parking reservation app, SpotHero provides easy parking for all, one spot at a time
Leading parking mobility platform with 20+ million cars parked, the largest network of connected parking facilities, and the most app downloads nationwide
Launched in 2011, SpotHero empowers drivers with easy, affordable parking at 6,000+ garages, lots and valets across 300+ cities in North America
Roman:
Roman is a digital health clinic for men that offers US-licensed physicians, personalized treatment, and a licensed pharmacy at your disposal
Treatments include sexual health, hair loss, and daily health such as stress relief
How it works:
Online visit – Report your symptoms and medical history to a US-licensed physician for evaluation
Free deliveries – Your treatment will be sent in discreet packaging
Ongoing care – Send your doctor a message any time to discuss treatment, side effects, or any concerns
Roman is improving the lives of men and their partners by making high-quality care accessible and convenient
Lime www.Li.me
Summary:
Warren Financial participates in unicorn pre-IPO company investments. In late 2018, we bought into Lime, the Micro-mobility company sweeping the world with electric scooters.
Our investment was at the same time, same terms and conditions as the $125million Google ventures investment
Nov 5, 2021 TechCrunch reported Lime raised $523m in additional capital to prepare for going public targeted in the next 12 months
Snapshot
2018 revenue of over $600m
2019 revenue of over $1.2billion
Investment of over $500m from Venture Capital companies such as Google Ventures
Dozens of cities covered
2020 revenue collapses due to Covid-19, early projections of $250m
2020 revenue rebounds rapidly as cities and cmapuses reopen
2021 Lime raises $523m As It Prepares to Go Public according to TechCrunch
Psychedelic Fund
Summary:
Psychedelic Fund LP is a venture fund launched in 2020 to invest in emerging and early-stage psychedelic-based therapeutic, wellness, and pharmaceutical companies around the globe.
Seeks to nurture the scientific advancement of mental, emotional, psychological, and physical health by investing in alternative therapies, modalities, and sciences that are committed to optimizing the human experience.
Mental health Facts
Investment Focus:
New medicines: hallucinogenic vs non-hallucinogenic
Therapy: associated training and protocol for administering hallucinogenic medicines
Consumer brands: nootropics and nutraceuticals
Education platforms: at all levels of medical/mental health academia
Holistic health centers
Technology & infrastructure
Research & development centers
GMP manufacturing & distribution platforms
Sustainable Solutions for Depression and Anxiety:
Fund Snapshot:
$25k minimum investment
8-year term
Preferred hurdle rate of 10%
2% management fee
About Warren Financial
At Warren Financial, we find truth in the idea that you can achieve your financial goals when you have a Greater Purpose in mind, going beyond just financial security. Our mission is clear: to assist our clients in achieving their financial objectives so that they can achieve their Greater Purpose. Our commitment in this process is to place fiduciary responsibility above all else.
We believe wealth management is not just about maximizing returns, it is about achieving your goals. Effective wealth management is about guiding our clients which helps to create peace of mind, when emotions might persuade them otherwise.
Mitigating risk in portfolio management begins with a fully custom portfolio construction, not a cookie cutter approach which forces a square peg into a round hole. We believe in a scientific approach, not an academic approach.
A rigorous holistic financial plan begins with your goals and ends with you achieving “Your Greater Purpose”.
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