2023 YELDO Performance Report

We are pleased to present our 2023 Performance Report, emphasizing our commitment to transparency and highlighting another year of growth for YELDO.

EXECUTIVE SUMMARY

• Solid Performance in 2023: we have celebrated a successful year in 2023, reaching over EUR 850 million in total transacted value*, marking our 10th investment exit and maintaining our historical internal rate of return at 14.6% in the 2019-2023 period
• Shift to More Senior Positions: over the past year, we have increased the seniority of our investment positions, offering additional capital protection to investors. Nearly half of the total capital invested in 2023 was deployed to senior positions, doubling our 2022 number
• Stable Returns: while strengthening capital protection with more senior positions, annualized returns have remained stable at 14.3% in 2023, outperforming the 60/40 “Traditional Portfolio”
• Focus on Real Estate Private Debt: in the current macroeconomic landscape, we believe that Real Estate Private Debt, which is living its “Golden Age”, continues offering strong potential for generating alpha

KEY HIGHLIGHTS 2023

In 2023 we celebrated more than EUR 850m in total transacted value*, we marked our 10th investment exit and maintained an historical IRR of 14.6%.

As an Investment Manager, YELDO adapts its investment strategy to shifting macroeconomic conditions: below is a recap of what we have witnessed in 2023 and how we have changed our offerings to capture the best risk-adjusted investment opportunities available in Real Estate. 

THE MACROECONOMIC LANDSCAPE IN 2023

Investment market: the 60/40 Portfolio has failed investors

2023 was another year of macroeconomic changes: stocks and bonds exhibited an unprecedented positive correlation marking a “failure” of the 60/40 “Traditional Portfolio”, a portfolio made of 60% stocks and 40% bonds.  

While in 2019-2021 the average correlation between stock and bonds was 0.23, the last two years saw almost a 3x increase in the correlation between the two asset classes undermining traditional portfolios.

As correlation between stocks and bonds increased, the role of alternative investments to add diversification to investors' portfolios is today stronger than ever. An integration of a share of alternatives into investment portfolios can stabilize returns and provide resilience especially under adverse market conditions, as proved by several large institutional investors [2] increasing their allocations to alternatives.

In particular, in 2023 compelling risk-adjusted investment opportunities emerged in Real Estate Private Debt.

Real Estate borrowers face increasing financing challenges

Real Estate developers are experiencing a period of unprecedented financing challenges. A recent study by CBRE [3] revealed that over 25% of European private commercial property debt maturing between 2024 and 2027 is at risk of not being refinanced by the traditional banking channels. 

A potential debt shortfall of EUR 176 bn will hit the market by 2026. This “debt funding gap” has opened up a unique set of risk-adjusted investment opportunities: what has been referred to as the “Golden Age” of Private Debt by Blackstone. [4]

Therefore, in 2023 YELDO has adapted its investment strategy to capture the opportunities offered by Real Estate Private Debt and we will continue to do so in 2024 as we believe that this asset class maintains a strong potential to generate alpha for our investors, while at the same time offering compelling capital protection.

YELDO PERFORMANCE IN 2023

In response to the 2023 testing macroeconomic scenario and the increasing need of debt financing, YELDO has strategically increased its focus towards even more secured positions. 

Out of nearly EUR 100m deployed in 2023, 48.4% of the total capital has been invested in senior positions, such as senior loans, doubling the percentage of senior positions in our yearly offerings compared to 2022.

Moreover, we have added further diversification to our investment offerings. We placed on our investment platform opportunities spanning across 5 different European countries (namely Italy, Switzerland, Spain, Luxembourg and the Principality of Monaco) and enlarged our investment asset classes, marking our first investment in Logistics. 

Thanks to all these strategic changes in 2023 YELDO investments recorded an annualized return of 14.3%, while the traditional portfolio, made of 60% equities and 40% bonds, generated a 8.4% rate of return.

YELDO PERFORMANCE SINCE INCEPTION (2019-2023)

Our investment philosophy stays the same

Since inception, our investment offerings have centered on stable economic areas in Continental Europe and selected asset classes, such as Prime Residential, Prime Hospitality and Logistics.

Our investment philosophy continues to be focused on asset-backed preferred positions (either preferred equity or debt) shielded by a sponsor equity participation that offers protection.

Our returns since inception

In the past 5 years, the traditional portfolio made of 60% equities and 40% bonds generated a 3.1% rate of return. In the same period YELDO investments have been able to record an annualized return of 14.6%.

Data continue to prove that adding a share of alternative investments to a well balanced portfolio improves returns, while providing additional protection against volatility. For example, considering the 2019-2023 period, an Alternative Portfolio with an allocation of 20% to YELDO investment offerings would have outperformed the Traditional Portfolio by an average of 2.4% per year.

Our investment offerings by seniority, asset classes and geographies

Since 2019, our investment offerings have mostly focused on protected positions, including Senior Debt (46.2%), Preferred Equity (24.5%) and Mezzanine Debt (22.7%). Only 6.5% of invested capital has been allocated to Junior Equity positions.

When looking at asset classes, 86.9% of our offerings involved Residential real estate projects, 9.6% Hospitality projects, and 3.4% Logistics opportunities.

Since 2019, 60.4% of our offerings, expressed as a percentage of invested capital, were located in Italy, 15.8% in Switzerland, 14,9% in the Principality of Monaco, 6.1% in Spain and 2.7% in Luxembourg.

CONCLUSIONS

As the market continues to evolve, YELDO's mission stays the same: providing direct access to institutional-grade investment opportunities through technology.

We do so by selecting a variety of real estate deals across different geographies, asset classes and risk-return profiles and letting our investors choose their preferred investment product: deal-by-deal investing or a diversified portfolio strategy via our YELDO Private Debt Fund.

We believe Real Estate Private Debt will still be a source of alpha for investors in 2024, discover more about our latest diversified strategy here below.