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Citizen Mint focuses solely on impact investments in the private markets. There are two main reasons why we do this.
PRIVATE MARKETS • DUE DILIGENCE
More opportunity to invest for impact in a direct and targeted way; and
diversification outside of public markets.
Historically, impact investments in the private markets were mostly made available to pension funds, foundations and endowments due to high minimums, relatively long holding periods and the higher level of due diligence required. Today, Citizen Mint is opening up this avenue for impact and return to a broader group of investors, including you.
What’s a Private Investment?
Simply put, private investments are not traded on a public exchange. They are increasingly an area of focus for many impact investors as a way to diversify out of the public markets, while potentially helping to fund a higher level of impact and capturing a competitive market return.
Total assets invested in the private markets globally have grown dramatically over the last two decades, to $10 trillion as of the end of 2021. We do not see this growth slowing as many individuals and institutional investors continue to diversify into the private markets. Further, new opportunities are constantly arising in the private markets.
Range of Investments:
As with public markets, private markets comprise many different asset classes including equity, debt, real estate, and special purpose funds, typically referred to as alternative assets.
The major types of private market investments are below (see private markets white paper for impact examples in each asset class):
Buying a company to grow it, make it more efficient or profitable with the ultimate aim of selling the business at a higher price in the future.
Early-stage businesses working on new or innovative solutions.
Pre-IPO capital, usually after initial funding rounds, to help scale a business.
Loans for a predetermined time before bank financing becomes viable.
Debt that is heavily discounted due to problems at the issuing company. The goal is to buy this debt cheap, restructure the company and/or sell off assets, then eventually resell the debt at a higher price.
Investments in multi-family, office, commercial or industrial properties.
Agriculture products, commodities, or land that hopefully can increase in value over time.
Investments in long-life, productive assets that usually have pricing power in the markets they serve (i.e. renewable energy projects, electric vehicle charging stations).
Special situation funds can have very diverse strategies but in general look to take advantage of market anomalies.
The Private Market Advantage
Risks and Concerns:
Manager or Sponsor Selection:
While returns in the private markets can be compelling, it is key to invest with the right manager or sponsor given that the dispersion of returns is huge, highlighting the big difference in performance between the best and worst managers or sponsors. This makes manager due diligence and selection paramount
The average commitment period is between three to 10 years and can be as much as 15 years in some circumstances. This results in private investments being considered “illiquid” or not easily saleable. While there may be the opportunity to sell in secondary markets, the price is usually unknown and, in some cases, can be at a large discount if buyers are hard to find. “Illiquidity premium” is the term used to describe the extra return investors require to lose access to their capital for a period of time. The longer the period, the higher the illiquidity premium.
Most private funds are set up as Limited Partnerships (LPs) or Limited Liability Companies (LLCs) for which you will be required to report annually to the IRS your portion of income, whether distributed or not. This reporting is done through Schedule K-1. Thankfully, K-1 reporting has become more common and has resulted in many online tax preparers creating custom worksheets to process private market distributions.
Citizen Mint believes private market investments can provide the direct impact our community members’ seek in alignment with their values and issues of concern. We also believe that private market investments can enhance portfolio diversification and risk-adjusted return if carefully added and monitored. The key is having a partner like Citizen Mint to curate the most promising opportunities based on risk, return, and impact and provide those opportunities in an accessible and flexible format.
We are excited about the positive impact we can make collectively. We hope you will join us in making a direct investment in change for the better.
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