INSUBCONTINENT EXCLUSIVE:
BOSTON: A New York investment firm pitched wealthy investors in recent days on a way to make returns of 22% to 175% using US government
programs designed to help Americans keep their jobs and boost the coronavirus-stricken economy, according to a marketing document seen by
Reuters.
Following questions posed by Reuters, Arcadia Investment Partners LLC, which has about $1 billion under management, said it had put
She did not elaborate further.
The firm had sent the pitch as recently as this weekend to "a limited number of sophisticated investors,"
according to the marketing materials, which are dated April 4 and marked confidential
advantage of the unprecedented government intervention after the novel coronavirus brought economic activity to a screeching halt.
Under
part of a $2.2 trillion government aid package, the marketing materials show
April 3.
Arcadia proposed to juice profits by borrowing 90% to 95% of the money from funding markets that were backstopped in recent weeks
by the US Federal Reserve.
'DESIGN FLAW'The small business lending program has had a chaotic start, with banks and companies saying more
crucial details need to be worked out
Some such lenders said they are yet to be approved by the government to make the loans.
Had Arcadia proceeded with its plan, its investors
would have profited handsomely from a virtually risk-free investment
Arcadia typically generates returns to investors of between 8% and 12%, depending on the type of investment, according to a March regulatory
The potential returns would also be far above other options available to investors
The US 10-year Treasury note, for example, currently yields around 0.77%.
Lucian Bebchuk, a corporate governance expert at Harvard Law
the US Treasury Department did not respond to a request for comment.
In the past, large-scale government intervention has engendered fierce
- Jenrette banker Kammy Moalemzadeh in 2001, Arcadia makes investments in areas such as private equity, real estate and distressed credit
funds, according to its March regulatory filing
It said its investors include investment funds and wealthy people, including hedge fund managers and chief executives.
In the marketing
document, the firm said it would work with an unidentified asset manager on the plan
That asset manager, which Arcadia said has $17 billion under management and was founded in 2012, has experience financing small business and
consumer credit through online lending platforms, with more than $6 billion dedicated to that strategy.
If the small business borrowers use
the money for employee payroll and other approved expenses, the US Small Business Administration would forgive the 24-month loans in as
little as three months, Arcadia wrote in the document
The loans carry a fixed interest rate of 1%
The remaining loans will be repurchased within 24 months, according to the Arcadia materials.
In its document, Arcadia did not give the size
But it noted that investors would contribute 5% to 10% of the equity of the new fund
The rest would initially be borrowed from the repurchase agreement, or "repo" market, which the Fed has backstopped in recent weeks.
After
last month to help the economy.
Investors in the Arcadia fund would pay no management fee but would be charged 20% of profits, the document
