Apollo Investment Management: 10% Dividend Yield Through Private Lending

Apollo Investment Corp.

As an individual investor, our investment choices are limited…wouldn’t it be nice to be able to participate in the double digit returns we hear about in the news from private equity and other private placement investments. These types of investment are normally only available to ‘accredited investors’. Unfortunately, the definition of accredited investor has more to do with your level of net worth and investable assets, not your knowledge of investments. So, a widow left with a sizable investment portfolio but no inkling of investment knowledge can invest in these private placements, assumed to be too illiquid or too complex for the population at large. It doesn’t matter that some ‘regular’ folk may be better at analyzing the potential investment for appropriateness.

Throughout the financial crisis, we also heard news of Warren Buffet investing in several distressed companies and receiving very favorable terms. (Goldman Sachs preferred stock with an 8% dividend) Terms that you and I would find difficult to negotiate without the leverage of controlling a multi-billion dollar investment portfolio.

But there are ways we can participate in some of these private transactions and generate returns in the low double digits by participating in investments in private companies. One way to do so is through investments in business development companies (BDC’s). While BDC’s can lend to publicly traded companies, the majority of their investments are in privately held firms.