Joe Tigay Are you seeking high yields but worried about the risks of BDCs and REITs?
You aren’t alone. Andrew Ross Sorkin recently published an article in the New York Times’ Deal book discussing a popular Reit managed by Blackstone known as the Blackstone Real Estate Income Trust (BREIT).
This article discusses the controversy surrounding the valuation of Blackstone’s Real Estate Income Trust (BREIT). BREIT has managed to maintain a high appraised value for its assets even as the value of other real estate funds has declined. This has led to questions about how Blackstone determines the value of its assets, since Blackstone has the final say on the appraised value rather than relying solely on a third-party appraiser.
Blackstone defends its approach, arguing that its valuations are conservative and that its data is more accurate than that of third-party appraisers. However, some on Wall Street are skeptical and believe that Blackstone may be inflating the value of its assets.
A different approach to consider is Structured Notes. This email explores how Structured Notes can offer similar yields with less risk and more diversification than high-yield, high-leverage securities.
Risks of BDCs and REITs:
- Price Depreciation: Can erode yield advantage.
- Lack of Diversification: Vulnerable to price shocks in specific sectors.
- Volatility: Can cause significant portfolio fluctuations.
Benefits of Diversified Structured Notes:
- Similar Yields: Can match yields of BDCs and REITs.
- Downside Protection: Limits potential losses.
- Diversification: Spreads risk across multiple assets.
- Tailored Risk/Return: Choose notes with your preferred balance.
Structured Notes vs. BDCs/REITs (Example):
- 5-Year Performance: BIZD ETF (BDCs) offered a 9.9% yield but only a 4.77% total return.
- 5-Year Performance: AGNC (REIT) offered an 11.93% yield but had a negative total return.
Structured Notes offer a more consistent path to high yields.
Learn More: Why Structured Notes for Yield.
