Pooled Investments
Rhinebeck Fund provides the option to invest in a pooled investment structure, or in specific policies one at a time (see Direct Investments.) The greatest advantage to the pooled structure is that, with their initial investment, Investors automatically get a stake in all the Fund’s active policies in the pool.
Investors purchase membership interests in the Fund via a committed capital contribution. The total investment to be made by each Investor is committed up-front, but then made in accordance with an investment schedule: e.g. 28% of the total commitment at signing, and 1/6th of the remaining commitment paid annually over each of the next 6 years. Generally, the Fund uses the Investor’s initial capital to purchase insurance policies in the secondary life insurance market. Each Investor has an interest in each policy owned by the Fund, with the size of the interest dependent upon the size and timing of the Investor’s investments. For each owned policy, the Fund pays ongoing premiums and upon the death of the person on whose life the policy was written (the Insured), collects the death benefit from the carrier, and distributes the money to the Investors in accordance with their interests in that policy.
IS THERE A MINIMUM INVESTMENT?
The minimum commitment is $200,000 (with, for example, $56,000 due initially), however, the Manager has the discretion to accept lesser commitments.
LIQUIDITY NEEDS ARE SEPARATE FROM REVENUE EVENTS
Rhinebeck Fund relies on capital calls to satisfy its liquidity needs for policy maintenance (premium payments, e.g.) Predictions of revenue events (collection of death benefits or sales proceeds) aren’t reliable enough to ensure adequate liquidity.
WHEN AND HOW DO INVESTORS GET PAID?
Investors are paid immediately upon receipt of revenues in relation to the “triggering” of a policy. A policy is triggered when an Insured dies and a death benefit is collected; or when the policy is sold. While the Fund’s objective is to purchase policies and hold them until the Insured’s death, the Fund may from time to time sell a policy into the tertiary market if deemed appropriate by the Fund Manager.
HOW IS THE MANAGER PAID?
Once a policy triggers, the revenue generated is split between the Investors, on the one hand, and the Manager (in the form of a Success Fee) on the other. Such allocation between Investors and Manager is computed on the basis of the Effective Yield (or the internal rate of return – IRR%) generated by the ownership and triggering of that particular policy. Simply put, Investors in the aggregate are paid out the first 10% of IRR% and to the extent that the policy’s IRR exceeds 10%, the Manager and the Investors split revenues according to formula. Please refer to the Rhinebeck Fund Operating Agreement for specific details.
ARE THERE ANY OTHER WAYS THE MANAGER IS PAID?
The Manager collects quarterly management fees only on active (non-triggered) policies acquired prior to 2023. Otherwise, the only way that the Manager is paid is by the above-mentioned Success Fee (where the IRR% > 10%.) No salaries are paid to the Manager, or to anyone. Nor is there any reimbursement for “overhead” expenses. All expenses directly connected with the purchase and maintenance of a policy (purchase price, premiums, etc.) are capitalized and “paid back” to the Investors when the policy triggers and the revenues are collected and distributed. Certain indirect costs are paid by the Fund as expenses and accounted for as such on Investors’ K-1s. Please refer to the Rhinebeck Fund Operating Agreement for specific details.