A little over a year ago, New York-based Cadence Group launched an alternative investments platform that uses an end-to-end securitization process to make the investment process streamlined for both investors and the companies looking for capital. Here’s my Cadence review, albeit late to the game.
The Nuts and Bolts of Cadence
Cadence’s homepage puts it right out there.
“Cadence is unlocking access to exclusive high-yield, short-term investments traditionally reserved for institutions. Earn up to 10% APY on your investment in as little as 1 month with a low minimum of just $500 to get started,” the company’s homepage states.
Where can I sign up? Who doesn’t have $500 lying around to earn 10% in as a little as a single month? If you’re saving more than a few percentage points of your after-tax income each month, you probably have the discretionary income to invest.
But before you sign up, it’s a good idea to understand the process from beginning to end. To do that, I’ll look at a past deal it’s done to give you the basics. Being a bit of a nut about sports-related investments, I’ll use ThunderRoad Financial as my guinea pig.
Who is ThunderRoad Financial?
It provides credit to hundreds of powersports dealerships across the country. According to its Cadence profile, it has originated more than $200 million in loans since its founding in 2014.
The company’s senior management has significant experience in powersports financing. Its chief executive officer (CEO), Donal Hummer Jr., helped launch Harley-Davidson Financial Services, where he stayed for 14 years. Another stop was spent setting up the powersports financing division of an Illinois community bank. He went out on his own in 2014, setting up ThunderRoad Financial in Reno, Nevada.
The partnership between Cadence and ThunderRoad came together last October. Since then, ThunderRoad has done nine deals through Cadence, raising a little over $6 million in the process, and more importantly, for Cadence investors, has a weighted average annual percentage yield (APY) of 10.32% and a weighted average duration of 90 days.
Ok, so, it hasn’t averaged 10% over a single month, but it’s pretty darn close.
Who Can Invest?
To invest in any of ThunderRoad’s vehicle financing deals, you have to be an accredited investor, unfortunately. That means if you’re an individual, you have to have earned more than $200,000 in 2019 and 2018. Alternatively, if you don’t meet this requirement, but have a verifiable net worth of $1 million, you’re also considered to have accredited status.
Ultimately, between the efforts of the Securities and Exchange Commission and the equity crowdfunding industry, it’s likely that the bar will be lowered so that more Americans can diversify their investments to include private capital investments such as the ones offered by ThunderRoad and others on Cadence.
In the meantime, if you aren’t accredited, be patient, your time will come.
The Process Itself
Once you’ve been approved to invest in Cadence’s short-term debt offerings, you can fund your Cadence account through wire transfers or ACH, which stands for automated clearing house. Once the funds have cleared (one to five days), the funds will show up in your account. Your funds are FDIC-insured up to $250,000.
As I stated in the beginning, for some of Cadence’s offerings, the minimum is as low as $500. Cadence charges no fees to investors. The beauty of Cadence’s platform is that it uses blockchain technology to unlock investments that previously would have been too expensive to administer.
Once the investment has matured, your principal and interest (yield) are returned to your account, and the process begins all over again.
I encourage you to take a look around the Cadence site and reach out to them if there’s anything you don’t understand about the process.
The Bottom Line on My Cadence Review
Like every non-guaranteed investment, private or public, there is risk involved. Recently, some investors have bought Hertz (NYSE:HTZ) stock in the hope of a fast buck. This, despite Hertz warning investors they have little hope of recouping their investments.
From where I sit, a three-month hold on a loan to a customer of a powersports dealership, where that loan gets packaged to a long-term investor, isn’t nearly as risky as investing in Hertz.
Take a closer look at some of the originators Cadence is partnering with and I think you’ll find that they’re not a bunch of Johnny-come-lately’s.
If you’re an accredited investor, I’d give it a close look. If you’re not, hopefully, Cadence will have something for you soon.
Cadence looks like the real deal.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.
Investing through equity and real estate crowdfunding or asset tokenization requires a high degree of risk tolerance. Despite what individual companies may promise, there’s always the chance of losing a portion, or the entirety, of your investment. These risks include:
1) Greater chance of failure
2) Risk of fraudulent activity
3) Lack of liquidity
4) Economic downturns
5) Dearth of investor education
Read more: Private Investing Risks