WHY WE LIKE THIS OPPORTUNITY
What is Outcomes Strategy?
Outcomes Strategy is a ‘managed account’ option for investors to participate in ISA investing. edly allocates investments to an investor in securities evidencing cash flows from a variety of ISA pools with a diverse mix of schools, industries, and geographies.
Outcomes Strategy provides investors with diversified ISA investment securities backed by (i) pools of ISA contracts, and (ii) loans to schools backed by ISA contracts. As an alternative to a single investment directly in an ISA pool or ISA-backed loan, the use of a managed account allows investors to minimize risk by diversifying. This method for investing in ISAs is available exclusively through the edly platform.
How does it work? How are funds allocated?
Outcomes Strategy accounts will be actively managed by edly. Asset allocation will be focused on monthly income generation and diversification. edly assembles diversified investments by applying investor funds across ISA pools from different schools that have varying geographic and industry placements. Outcomes Strategy accounts are intended to provide a convenient way to diversify your edly participations.
In the above example, the managed account portfolio is made up of 7 different pools:
- 2 different coding schools addressing different employer needs (e.g., data science and information technology, respectively)
- 2 universities (e.g., engineering and education students)
- 2 vocational schools (e.g., training welders and diesel mechanics)
- 1 healthcare training school (e.g. nurse technician)
How are investors protected?
Underwriting adheres to edly’s Guiding Principles and Investment Philosophy. Since ISAs are a new asset class, conservative modeling assumptions are applied to ensure proper alignment between the school and investor. Offerings are structured in a way that protects investors from risk while rewarding schools for strong student outcomes. Investors are protected in the following ways:
What are attractive features of the investment?
Monthly cash flows
Investors receive distributions on a monthly basis.
Distributions are considered return of capital until the original basis has been recovered. Distributions in excess of basis will be reported on a 1099 MISC during the year of the distribution. Or, as interest income if structured as a loan to the schools.
edly targets 4-year duration and seeks to return all investor money within 5 years.
Investment Reporting & Monitoring
edly makes distribution and performance reporting available each month so that investors can monitor ongoing performance of pools in their portfolio.
The schools listed below are SAMPLE schools for a SAMPLE Outcomes Strategy managed account portfolio.
Sample school and ISA data is in this offering to provide visibility into the types of schools edly includes in the Outcomes Strategy managed account, and the data that is associated.
WHAT ARE THE ASSETS BACKING MY INVESTMENT?
How ISAs work:
Instead of taking out a loan, students agree to pay a fixed percentage of their earnings for a fixed number of months, which customarily ranges from 24 to 120 months (but can be more or less). Students are obligated to make a monthly payment only if they are working in that month and earning more than a specified minimum salary, which typically ranges from $25,000 to $60,000
For example, a student may have to pay 10% of their earnings each month for 48 months, but only if they earn over $45,000 per year. Payments are also subject to a total cap on payments– for example, the student won’t need to pay more than 1.4 times the tuition (sometimes caps are higher or lower than that multiplier).
There is also a payment obligation window after which the student no longer has any obligation to make further payments, regardless of the number or amount of payments made. So, if the student doesn’t get a job within a certain number of months after graduation (typically 60-120 months) the contract is done and the student does not owe anything.
All edly ISAs adhere to edly’s Investment Philosophy:
edly seeks investments in ISAs which we believe are likely to produce high risk-adjusted returns for investors while also providing access to education for promising students.
Our approach is systematic and can be applied to any higher education program. Our screens typically only allow us to invest in the best 20% of the possible higher education programs.
edly analyzes the historical outcomes of students as captured in data about the schools, the area of study, and geography. We look for an attractive relationship between the tuition of the program and the student outcomes. The higher the “ROSI” (Return on Student Investment) the more attractive it is to edly.
Important historical outcomes we consider include:
- Graduation Rates
- Time to employment
- Employment rate
- Starting Salaries
- Salary Increases over time
- Non payment rate
edly works with the schools to ensure there is alignment of interest among schools, students, and investors. We should all succeed if students succeed.
edly seeks high impact investments – we believe that students of all backgrounds can be successful with the right access to education and resources and therefore we will NOT use wealth-based credit scores such as FICO. We believe our own methods are more predictive of success than credit scores.
HOW DO I GET PAID?
Investors receive monthly distributions on the 25th (or the following business day if it is a weekend or holiday) of each month. Distributions contain the pro rata share of ISA cash flows (net after servicing and management fees) from all pools in an investor portfolio.
How does Outcomes Strategy differ from investing directly in current edly offerings?
Outcomes Strategy accounts are managed by edly on behalf of the investor. These accounts are assembled to maximize diversification and minimize risk on behalf of the investor.
What is the investment duration, and is liquidity an option?
The expected duration is 48 months, which is determined by modeling of the cash flows.
What fees and expenses are associated with the investment
Managed accounts allow edly the flexibility to rebalance assets in order to maximize income generation. There are fees and expenses associated with investment:
- Management fee: 4% of ISA cash flows
- For example, if an investor invests $10,000 in the strategy, over a 4 year period, if they received total cash flow of $15,000, then edly would earn fees of $600. These fees would be paid monthly as investors get cash returned from the strategy.
The data below is SAMPLE cash flow data for a SAMPLE Outcomes Strategy managed account portfolio.
This graph does not take into consideration edly’s targeted 4 year final termination date. Any remaining investments after 4 years will be liquidated on behalf of investors.
Please read the important investment documents linked below as you access this opportunity.