Most financially successful entities rarely keep their wealth in cash.  And why should they?  Cash can be taxed, and inflation slowly eats away at it’s worth.  Many investors, however, are asset rich, meaning they have ownership of assets that may be used to draw a line of credit upon or “monetized.”  These assets may be mines, diamonds, gold, other precious metals, real estate, art, etc. Attempting to place an asset into a private placement program or private placement platform may be more difficult than you think.

 

Let’s define these assets.  Precious stones may be diamonds, rubies, gems owned or inherited by an investor.  Since the value of stones vary, the precious stone should also have some form of appraisal or valuation as well as a safe keeping receipt (SKR) or equivalent.  It may be difficult to draw a line of credit upon them or monetize unless  you can find a person willing to purchase the item in the open market.

 

Precious metals may include gold, silver, copper isotope, platinum, or other. Most of these metals are difficult to monetize as well, with the exception of gold.  Gold bullion bars are the most easiest form to monetize as they are basically the same as money and are easily sellable by a bank in case of a default on repayment of a line of credit.

 

In-ground assets, such as oil, copper mines, gold mines, are abundant, however, it is VERY difficult to obtain a line of credit against these since no bank wants to deal with selling a mine or digging up the assets in a mine to get back money they loaned out in the form of a line of credit.  If the trader or high net worth individual has a non performing private placement platform, the bank will lose it’s money and not be able to easily recoup its lost liquidity with a mine or other in-ground asset. Even with geological reports stating the value of the mines in the billions, almost no one will loan against them.

 

Some have also attempted to place valuable art into trade.  The difficulty here is that the value of art is most often undeterminable.  Demand for art dictates value, and demand fluctuates widely.  Furthermore, in case of a default, banks do not want to hassle with selling art.

 

Many have also attempted to use real estate or CMOs (collateralized mortgage obligations) to enter private placement programs.  Unfortunately the real estate market is unstable and value for the most part is decreasing which makes this an unfavorable asset.  The investor may want to obtain a loan against the property and use those proceeds to enter trade.

Despite all these obstacles, one can still trade in a trading platform if they meet certain criteria.  The asset must be valuable and in strong demand, such as gold or possibly diamonds.  The value of the asset must be identified by an appraiser or other 3rd party entity.  Moreover, the bank or investor must loan out cash with a large enough loan to value (LTV) to enter the private placement program.  Afterwards, the trader must obtain a line of credit from the proceeds/asset to enter trade.  Finally, the asset must be unencumbered after the private placement trading has commenced.

The difficulties stated above multiplied with the difficulty of finding a real private placement platform that performs makes using hard assets for trade ALMOST impossible. More and more private placement traders are turning to liquid cash clients and refusing to deal with the headaches associated with obtaining appraisals, SKRs, geological reports, and other obstacles.  If you have a hard asset, the best bet is to sell it, obtain the cash, and then move forward into trade.

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For more information regarding private placement program, private equity management, private placement platform and asset investment management; please visit www.crowncapitalfunding.com
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