FAQ
This page contains answers to common questions about Goldfinch Prime
What is Goldfinch Prime
Goldfinch Prime is an investment opportunity that offers non-US investors exposure to private credit, which has long been an attractive asset class for institutions and high net-worth individuals (“HNWI”). Goldfinch Prime is expanding access to private credit by making high quality, and diversified private credit available onchain
What are the risks of private credit?
Investing in private loans (also called “private credit”) through Goldfinch Prime, provides a more predictable income stream compared to stocks or crypto (which tend be highly volatile and do not provide strong dividends). By including Heron Finance in your portfolio, you can achieve a more balanced risk-return profile, with the potential for steadier income and lower overall volatility compared to a portfolio solely composed of stocks and bonds. While private credit returns are historically higher than traditional fixed-income investments like bonds, and more stable than stocks, they do come with some unique risks, including:
Reduced liquidity (quarterly for Goldfinch Prime)
Sector and concentration risk (which is why Goldfinch Prime diversifiees you into over 1000 loans from several of the best managers in the world)
Hard to value assets
Lack of transparency (though Goldfinch Prime shows you every asset in your portfolio)
Deal-structuring complexity
Servicing risks
Relatively short history
To help mitigate these risks, we implement a comprehensive strategy when creating portfolios for our clients. Read our article to learn more about each risk and our approach to risk mitigation.
What investments does Goldfinch Prime offer?
Goldfinch Prime offers a custom exposure to institutional private credit funds onchain. It is a single portfolio consisting over 1000 assets from multiple private credit managers.
Specifically, you will own contingent payment notes issued by Heron entities ("the Manager") that are backed by equity interests in third-party, institutional private credit funds.
Through your Goldfinch Prime Private Credit portfolio, your exposure is thousands of loans in funds overseen by leading private credit managers. These funds are called Business Development Corporation (BDCs), for example the Ares Strategic Income Fund. While there are fully public BDC’s, Heron typically invests in the “non-traded” or “private” variations, which are not available on mainstream brokerages, giving you access to income typically reserved for institutions. Moreover, these non-traded ones far less volatile than typical public funds.
Each month or quarter, Heron receives a cash dividend from the BDCs and pays out income based on your portfolio’s exposure to the underlying loans.
What are the recommended allocations to alternative assets?
Private credit is considered an alternative asset class, along with real estate investments, private equity, hedge funds, commodities like gold and silver, infrastructure, collectibles, and digital assets. The recommended allocation to alternative assets in a financial portfolio can vary depending on your goals, risk tolerance, investment horizon, and overall financial situation. Factors to Consider:
Risk Tolerance: Investors with a higher risk tolerance may allocate more to alternative assets, while those with lower risk tolerance should allocate less.
Investment Horizon: Longer investment horizons can justify higher allocations to alternatives, as these assets often require patience to realize their full potential.
Liquidity Needs: Typically investors with immediate liquidity needs should limit their exposure to illiquid alternative assets. We aim to fulfill redemption requests on a quarterly, best-effort basis and we don’t have a lockup period which is common for other private credit investments.
Diversification: For many investors, one goal of adding alternative assets is to diversify their portfolio and reduce overall risk. Investors may adjust their allocation to alternatives to complement other asset classes in their portfolio.
Example Allocations To get a sense of the range you might consider allocating to alternatives, institutional investors like pension funds, hedge funds, and asset managers allocate 3-30% of their investments to private credit. A conservative approach might be on the low end of that range, and an aggressive approach might be on the high end. Here are some examples:
Conservative: 5% to 10% in alternatives.
Moderate: 10% to 20% in alternatives.
Aggressive: 20% to 40% in alternatives.
It’s important to note that these are general guidelines and individual circumstances will vary. Investors should consult with a financial advisor to determine the most appropriate allocation to alternative assets based on their specific financial situation, goals, and risk tolerance.
How have these investments performed historically?
When you invest in loans with Heron Finance, you are investing in the “private credit” asset class. For more than 30 years, private credit fund managers have provided consistent returns that outperform the S&P 500 (source: Prequin, NYU Stern). They have also done so with lower volatility than the stock market and without a single negative annual return. Obviously, past returns are no guarantee of future results. To learn more about private credit’s performance, check out our articles:
What are the fees?
0.5% annual management fee to the Manager (which is taken prior to distributing interest onchain), and 0.5% withdrawal fee to the Goldfinch Protocol, which happens onchain at the same time that you withdrawal funds.
There are no additional hidden fees or expenses outside of these fees.
The yield and distributions shown in your portfolio is net of fees, so this is the amount remaining after fees have been deducted.
What is the lockup period / liquidity policy?
No lockup period.
Unlike most private credit funds, Goldfinch Prime doesn’t require a multi-year lockup. There are no lockup periods, which means clients may request redemption at any time on a quarterly basis. There are also zero penalties or fees for redemption.
Our goal is to process all withdrawal requests within one quarter, subject to available liquidity. It is important to note that we cannot guarantee redemption within the quarter. There may be instances where one of the funds that Heron provides exposure to suspends redemption during a given quarter, delaying a withdrawal. We aim to provide efficient processing of redemption requests, and if we anticipate a delay in fulfilling a request beyond one quarter, we will proactively notify our clients.
I invested in older Goldfinch pools. Where can I find those? What is happening to those pools?
If you invested in pre-Goldfinch Prime pools, ("Goldfinch V1") you can still go to app.goldfinch.finance to view status, claim payments, etc.
The loans from Goldfinch V1 continue to mature, and will be maintained and supported until they do. If you have particular questions about the loans, you can hop into the Discord or the Governance Forums to discuss with other community members
I have other questions / am interested in discussing investment or business development opportunities with Goldfinch Prime
If you have questions that aren't answered here, or you want to discuss investing in or collaborating with Goldfinch Prime, please reach out to [email protected]
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