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PremiumPoints 2Q-2019 Issue

Posted by: Thomas F. McKeon, CFA on August 20, 2019

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In this Issue: Review and Outlook 2Q-2019, we introduce our newest custodial relationship, summarize our newest partnership investments, explain our operating objectives for the partnership, talk about Capturing the Illiquidity Premium, decompose partnership expected returns, and write about the Simple Equation.

2Q-2019 Review & Outlook

Global Markets continued to power ahead in the second quarter with US Large Cap stocks gaining 4.3%. Even U.S. municipal bonds managed a 2.2% total return for the quarter, and have rallied strongly from a low in late 2018. Although the markets reached all time highs in the third week of July, concerns about destructive trade wars, and bond markets signalling recession led to some severe market volatility in early August.

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A Word About Our Newest Custodian: Millennium Trust

The regulatory authorities informed us earlier this year that our private partnership--Clothier Springs Capital Partners--was required to be custodied at a “qualified custodian.” A qualified custodian is a vendor that specializes in providing custody of private assets, reporting and third-party verification of all transactions in the partnership. We transferred custody of Clothier Springs Capital Partners to Millennium Trust in early July 2019.

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SEC Finalizes New Rule for Disclosure

On June 5, 2019, the Securities and Exchange Commission (SEC) finalized a new rule that includes a new requirement for SEC registered investment advisor (RIA) firms to provide a brief relationship summary to retail investors.

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Update: Clothier Springs Capital Partners | New Investments

We made six new investments during the quarter, spending down the large cash balance that resulted from several large new member investments in 1Q-2019. They are...

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Partnership Operations

We are aiming for a roughly even split of partnership investments between real estate debt and real estate equity. We are also aiming for diversification: geographical, project type (rehab or develop), and target client demographics (workforce vs. luxury).

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Capturing the Illiquidity Premium

The graph below shows the returns from three of our investment strategies: Clothier Springs Capital Partners (CSCP), our Global Hedged Plus (GHP) strategy and a blend of 80% GHP plus 20% CSCP. The data begins with the month of February 2018, just prior to when CSCP began operations.

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Decomposing Partnership Returns

Some of our partnership members have inquired recently about monthly returns and how the Net Asset Value (NAV) grows. Here are the realities of the partnership returns:

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