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FinaTech Advises Investors and Fund Managers, Helping You Boost Returns While Minimizing Risk



This solution rapidly deploys the LPs' capital, while minimizing the cost of acquisition of new assets without the need for subscription lines. It uses patented TALP-derived predictive analytics to manage dual leveraged portfolios for the benefit of multiple levels of investors.


Sensitivity Analysis For the Exemplary Structure

The step-by-step example illustrated below is based on portfolio investments earning 9%. The table below shows how the subordinate class would fare under a range of different returns.

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Step 1 - The Fund's Structure is Established

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Step 1. A TALP-based optimization analysis determines that the fund should be comprised of three classes of LP units: 40% Senior LPs, 35% Mezzanine LPs, and 25% Subordinate LPs, with the Senior LPs receiving an 8% annualized preferential return from the fund’s portfolios, and the Mezzanine LPs receiving a 12% preferential return from the find's portfolios. The Subordinate LPs would thus receive the remainder of the fund's earnings. The fund is planned to have dual real estate and equity portfolios leveraged by rated bonds.

Step 2 - Investors Fund Real Estate Portfolio

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Step 2. The fund calls on its LPs’ capital commitments to acquire assets for its Real Estate Portfolio.

Step 3 - The Bonds Are Sold as Equities Are Acquired


Step 3. Bonds are sold concurrently with the acquisition of assets for the fund’s Equity Portfolio. Both the real estate portfolio and the equity portfolio collateralize the bonds. Thus, a purchase of $100M in assets for the fund’s equity portfolio would contribute to an asset base of $1.1B, which would be servicing $100M in bonds. Once the fund had acquired a billion dollars in equity assets, it would be servicing a billion dollars in bonds that were collateralized by two billion dollars in assets, for a total LTV of 50%.

Step 4 - Additional Bonds Are Sold to Expand Both Portfolios

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Step 4. The fund continues to expand the size of its equity and real estate portfolios by selling additional bonds. In the illustration above, the Equity Portfolio and Real Estate Portfolio have each been expanded from $1B to $2B through the sale of an additional $2B in bonds. This increases the LTV ratio of the fund’s bonds from 50% to 75%.

Step 5 - The Portfolios Are Liquidated, the Bonds Repaid, and the Remaining Proceeds Are Allocated According to Preferences

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Step 5. Both portfolios are liquidated. In this example, they both produce a 9% return. The proceeds pay off the bonds at an annualized interest rate of 5%, the senior LPs at a preferential return of 8%, and the mezzanine LPs at a preferential return of 12%. The remaining proceeds thus go to the subordinate LPs for a 54% return. The table below summarizes the math.

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