Investors today are bombarded by stories about market melt- downs/meltups. The pundits proclaim with compelling certainty: The economy is great! Others with equal creden- tials: The economy is weak and getting worse! Every day
it’s something different; most recently, although Public Markets
overall have performed well, VOLATILITY is the new normal so
fasten your seatbelts, the markets are going to be an even bumpier
ride. The relative calm of the Private Capital Market is drawing
capital from investors looking for a good alternative to publicly
Typically Private Market investments are not as volatile on a day
to day basis for the simple reason they don’t have the same level of
liquidity; this, quite simply, means people don’t have the opportunity to react to the daily market ‘noise’ because they can’t as readily buy or sell; by default, Private Market investors adopt a longer
term investor philosophy (a better investment horizon) v. the shorter
term, speculator mentality, that might see the same stock repeatedly
bought and sold by the same investor.
As a trade-off for giving up liquidity, many Private Market products
offer a yield or distribution attached to it. The promoters of these
products say: “Yes, we know you can’t jump in and out of this
product, so we will PAY YOU TO WAIT.” Investors, naturally, will
seek out the highest yield with the lowest risk.
Glen Road Capital has created a product offering that is unique in
its approach, creating a high yield offering for investors – about
10% per annum – with maximum predictability: the Glen Road
Investors typically have two options when investing in
Equity, where they own shares in a company and participate
in the profits; and
Debt, where they receive interest payment on the amount
they have loaned to the company.
Each of these has pros and cons for both the investor and the
company in which the investment is made.
In an equity investment, a company will come up with a valuation
that is generally a function of its profitability. Typically, the range
would be in the range of three to five times pretax earnings.
Based on that valuation, the investor would buy shares in the
company and participate in the ongoing profits. The negative for
the investor, however, is that they generally don’t have any control
over the predictability of profits and therefore their yield can vary
year over year (there’s the volatility creeping back into Private
Market investing). In addition, the only real opportunity for liquid-
ity is selling the company or finding another investor to take them
out. And from the company’s point of view they now have a share-
holder that may limit their ability to operate their company in a
fashion they would otherwise not operate if they did not have
In a debt investment, the investor receives a prescribed interest rate
and generally there is a term to the loan. So, while there is a defined
exit strategy, it there is no further upside in the investment and it
may be constricting to the company’s cash flow to fund the repayment.
Glen Road Capital, in offering our revenue stream investing products, provides investors with the best of both worlds: a high-yield-ing product with excellent predictability (and, therefore, low volatility). It also offers distinct advantages over similar investments:
A low correlation to Public Markets;
The revenue streams are aggregated from many separate investments, providing more diversity, as well as lower volatility;
The industry knowledge held by the principals raises the bar to
others hoping to capitalize on this investment philosophy,
providing Glen Road Capital with a special advantage to grow
quickly, without sacrificing yield.
In this model Glen Road makes an investment in a company by
purchasing a portion of the company’s top line revenue. Although
the purchase is for a relatively small part of the company’s revenue
(usually in the range of ten to thirty-five per cent), it takes security
over the entire business.
REVENUE STREAM INVESTING
By Steve Meehan
Chairman, Glen Road Capital
Glen Road Trust is approaching completion of its first year of
operation. In the last quarter of 2017, the Trust reached the
targeted annualized return of 10%. We have produced a brief
video giving a broad-brush sketch of our business model. Watch
for it on our website: