Where is the Value?

Investments with meaningful intrinsic value remain scarce with public markets still overvalued and a recent influx of volatility.

International public equities have had lackluster returns during the past five years while US markets appear to have stalled out as well over the past twelve months.

Our investment team continues to see pockets of value in both alternative private assets and select publicly-traded categories  (see public update below).

In several sectors,  private assets can still be purchased at significant discounts to their public market counterparts while also offering some recession-resilient characteristics.

Of course, due diligence for alternative investments can be complex, including both standard baseline questions as well as quantitative analytical assessments.

Outside of the many hours of due diligence on a fund’s operations, investment strategy, etc…… we have found that the biggest success factor may lie within the fund’s management team.

Management team background checks, site visits and reference checks have always been important steps in our process.

We have recently added steps to evaluate a potential management team’s character, transparency, accountability, ethics and integrity.

Even if the ship looks great… someone still has to sail it through good times and bad.

Public Investment Update

On the public side, we continue to position non-indexed portfolios as follows:

• Lower-risk / lower-volatility equities (e.g. utilities, insurance)
• Diversification into gold as a hedge against global currency depreciation
• Select emerging markets with deep value (e.g. Hong Kong as it decouples from China)
• Yield opportunities in real estate sectors

This conservative positioning results in a reduced beta for portfolios (e.g. lower volatility relative to public market indexes) and would be deemed as defensive.

Occasionally, we also receive signals to hedge our positions against volatility in tactical portfolios, with the objective of further blunting major potential declines.

While there have been periodic tremors (e.g. Q4/18), market participants appear to have forgotten that equities do indeed have dark periods.

As such, we are prepared for when those declines occur, and subsequently will be ready to pounce on lower valuation opportunities as they arise.

The post Finding Value in Today’s Market Environment appeared first on Lotus Group.

During 2018, there were countless joys, many new marriages, several new babies, a few graduations, numerous new jobs, and more!

There were also a number of new beginnings for clients, disappointments to overcome, and celebrations of lives well lived.

As we come to the end of 2018, we are once again honored to be part of you and your family’s lives.

Heading into 2019, we are refreshed and rededicated to helping create some security, happiness, and a sense of purpose.

Thank you for sharing with us in this wonderful journey we call life.

Here’s to another fantastic year ahead; we can’t wait to see what your lives and ours have in store!

Public Market Update

Q4 of 2018 proved to be a tough pill to swallow for most investors.

After major indices surged Q3 highs, the market had an extreme reversal and tested bear-market territory (defined by a 20% decline).

If we focus on the S&P 500… wow what a difference a year makes!

Compared to 2017, investors’ had to stomach a completely different market environment in 2018 (see Chart I below).

Chart I – S&P 500 2017 vs. 2018  (Source: @dollarsanddata)

Global indices declined anywhere from 5-20%, with specific high-flying stocks declining in some cases by 33-50%, including many of the previous US tech darlings Facebook, Amazon, Netflix, and Google.

2018’s resurgence of volatility is a healthy reminder that markets are cyclical.

Major catalysts to the year’s volatility included:

• The Fed’s unwinding of the balance sheet
• Trade tensions with China
• The rising interest rate environment

There was also a coincident tightening of the US financial system (see Chart II below showing rises in 2018).

Chart II – Goldman Sachs US Financial Conditions Index

Such tightening typically indicates that businesses are having a more difficult time with refinancing, credit, and similar financial conditions.

This inevitably leads to lower investment and confidence by major corporations, which also has worked to slow the economy.

On the trade front, the US and China have been trying to hash out trade issues such as perceived imbalances, accused technology transfer, theft, cyber-security and tariffs.

Trade costs have increased with the tariffs and major corporate decision makers have responded with a reduction of capital investment until they better understand the eventual landscape.

While many expect a deal to be made in the next 90 days, nothing is certain besides the reality that a wide chasm in ideology exists.

Finally, the stock market itself is clearly showing the expectation of slowing ahead, given its status as a leading indicator.

Things to watch for in early 2019:

As we welcome in the New Year, here are a few items to keep an eye on:

1. The continued trade tensions between China and the US
2. Growth or lack thereof in the global economy and corporate profits
3. The Fed’s ongoing fiscal tightening
4. Stock market volatility and the potential for future declines from peak valuation levels

Public Portfolio Update

LGA clients are allocated across a number of different public strategies.

That being said, each strategy was executed to its specific charter throughout Q4’s volatility.

For Index investors, we rebalanced portfolios to systematically sell high and buy low while tracking market trends.

For Global Rotation investors, we were fully invested but defensively positioned to blunt the declines.

For Tactical investors we were heavily risk-off with cash and diversifiers to avoid the declines while targeting attractive re-entry prices.

Tactical investors also enjoyed a few volatility trading model triggers, which resulted in a couple successful hedges and alpha to the portfolios.

We will continue to diligently manage each client’s portfolio to their selected behavioral strategy and risk profile.

We also continue to encourage our clients to stick with their behaviorally-chosen strategy, and to focus on long-term goals and objectives.

Private Investments Update

Our private investment program saw a number of successful exits during 2018 which were additive to returns.

Additionally, many of our investors enjoyed consistent income and positive returns, in comparison to major public-market declines.

Two of the fourteen GPs we work with had some stress in their investments, and we have been diligently working to address these issues.

Finally, we built out our own in house fund-of-funds and direct investment capabilities.

We continue to work hard on reducing investment minimums, simplifying taxes with fewer K1s, and gaining more control through direct investments.

As we head into 2019, we promise to work tirelessly at furthing these solutions and attemping to create win-win solutions for all stakeholders.

As always, we are honored by the trust you have placed in us.

Warm Regards,

The LGA Investment Team

The post 2018 Year In Review appeared first on Lotus Group.

Despite 2018’s market volatility, LotusGroup private investments have continued to deliver consistent cash flows and returns for our growing group of clientele.

Program Developments

We continue to grow our fund-of-funds program as investment commitments help us to achieve scale and reduce overall costs.

We also officially launched our sister company, “LotusGroup Capital, LLC (LGC)” a few months ago.

The post Lotus Club: Private Investment Update Q4-2018 appeared first on Lotus Group.

LotusClub has continued to deliver consistent cash flows and returns for our growing group of clientele.

Launch of New Sister Firm, “LotusGroup Capital, LLC”

The post Lotus Club: Private Investment Update Q3-2018 appeared first on Lotus Group.

LGA private investments continue to deliver increasing distributions and asset values for our growing clientele.

The post Lotus Club: Private Investment Update Q2-2018 appeared first on Lotus Group.

Lotus Club continues to grow as 2017 comes to an end, with some very exciting updates below!

During Q4, clients invested $9.1M of additional capital and we sourced two new opportunities:

1. Litigation Financing, paying an 8% pref and targeting a 16%+ per year long-term return
2. Institutional mid-market real estate lending, yielding 6-8% and targeting a yearly 12% return

We also had 89 new placements for clients, and increased annual targeted returns to $98K per member

Finally, we are thrilled to announce the launch of our first fund of funds coming in early 2018.

This fund is bringing the best of our private partners under one hood:

1. Easier processing with Docusign vs paper
2. Improved expected returns with greater scale and speed
3. Reduced costs with up to 30-60% bulk buying discounts

LGA hopes you all have a safe holiday season!

________________________________________________________________________________

Lotus Club Program Highlights (90 day progress)

The post Lotus Club: Private Investment Update Q4-2017 appeared first on Lotus Group.

We activated another $9.0MM of client investments, including the addition of two new private LP investments.

1. Mid-market lending with an immediate 11.1% return, and subsequent 7.77% annual cash flow.
2. A roll-up of the waste management industry, currently paying out 8.7%, and targeting 15%+ per year long-term return.

We were able to initiate 65 new placements for clients, while also increasing the avg club member to $67K per year of cash flow.

Our first successful exit is on the horizon within the next 3-6 months – stay tuned!

Finally, we are working hard behind the scenes to create and offer our own direct funds in early 2018.

We intend to launch a fund-of-funds offering which will target cost reduction, diversification, and bespoke investment opportunities.

________________________________________________________________________________

Lotus Club Program Highlights (90 day progress)

If you know of someone else who would like to get on our mailing list, just have them send their email to info@lgadvisors.com and we will start sharing investments and details.

The post Lotus Club: Private Investment Update Q3-2017 appeared first on Lotus Group.

If you know of someone else who would like to get on our mailing list, just have them send their email to info@lgadvisors.com and we will start sharing investments and details.

The post Lotus Club: Private Investment Update Q2-2017 (25% GROWTH IN LAST 90 DAYS!) appeared first on Lotus Group.

The post Lotus Club: Private Investment Update Q1-2017 (Continued Exponential Growth!) appeared first on Lotus Group.

The post Private Investment Update Q4-2016 (Introducing “Lotus Club”) appeared first on Lotus Group.