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A MB Assets White Paper May, 2011

11925 Detroit Avenue Lakewood, OH 44107 216-373-3276 http://private-placement-programs.info

DIY: Principal Protected Private Placement Investments

By Dane Brigadier, Director of Marketing

THIS COMMUNICATION IS NOT TO BE CONSTRUED AS AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO PURCHASE ANY SECURITY OR INVEST IN ANY PRIVATE PLACEMENT PROGRAM OR PLATFORM. ANY SUCH OFFER OR SOLICITATION CAN BE MADE ONLY BY MEANS OF AN EXEMPT DISCLOSURE DOCUMENT AND TRADE PLATFORM OFFERING MEMORANDUM (WHICH CONTAIN A DETAILED DESCRIPTION OF RISK FACTORS). PARTICIPATION IN PRIVATE PLACEMENT PROGRAMS IS ONLY AVAILABLE TO QUALIFIED ELIGIBLE PERSONS. PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RETURNS. The author, Dane Brigadier and MB Asset Holdings, LLC ("MB Assets") are not Certified Financial Advisors, Registered Securities Brokers, Broker/Dealers and/or Stock Brokers. MB Assets is a business consultancy firm which provides advice to private individuals on or about business matters.


DIY: Principal Protected Private Placement Investments We’ve all heard about risk-less investments. And, contrary to popular belief, in the world of Private Placement Investment Programs, just because there is a buyer and a seller, this does not make an investment free from risk. So, what if you partake in a Private Placement Investment in which there was no risk? Meaning that if you could put up a certain amount for the investment, and you were guaranteed to at least receive that initial amount back. This is a dream situation for just about every investor; to risk next to nothing, and have the potential to gain everything. Although that is almost never a reality, there are some ways Private Placement Investors can come very close to that. It is true that investors have the capability of risking next to nothing to earn relatively insignificant returns by investing in U.S. Treasury securities, U.S. Government Bonds, T-Bills, T-Notes, et cetera. And, while these investments in principle do have risk, they are universally recognized and referred to as zero risk investments given that the only way for them to not pay their interest and principal would be the unlikely collapse of the United States Government; an event so austere that it is not considered possible. So, there is the possibility to risk very little, and make small returns with U.S. Treasuries; but the problem most investors face when investing in US Treasuries is that the investor feels that the "small returns" they offer is not worth the fact they risk next to nothing. Investors seeking larger returns than treasuries provide therefore begin to understand and acknowledge that more risk equates to the possibility of obtaining higher return, above that of the treasury investments. In theory, the higher the returns, the more risk they are exposed to, up to the point where they could lose their entire amount invested. Principal Protection Savvy investors know how the game is orchestrated; we must risk money to make money. However, what if you want the best of both worlds? That is, you wish to risk nothing, and yet still want to make sexier returns than US Treasuries provide. This may seem like an impossibility, and in most investment arenas it is. For instance, you can't buy a stock and be guaranteed you’ll receive your initial investment amount back, contrary to popular belief. A principal protected investment typically works in this fashion; the issuer of the investment program will guarantee the return of your principal; the amount your initial investment. That is if you agree to participate in the program for a specific period of time, traditionally ranging between 5 and 10 years. The manager then invests your money in a combination of bonds and other investments. How do they protect the principal amount from loss? The trick is, they invest the appropriate amount in bonds, which upon maturity, will equal your initial investment amount, leaving the remaining capital for the investment involving risk. In this environment, the manager could lose all of the money not allocated to bonds, and at the bond maturity the account would still have the full amount of the initial investment due to the interest on the bond. THIS COMMUNICATION IS NOT TO BE CONSTRUED AS AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO PURCHASE ANY SECURITY OR INVEST IN ANY PRIVATE PLACEMENT PROGRAM OR PLATFORM. ANY SUCH OFFER OR SOLICITATION CAN BE MADE ONLY BY MEANS OF AN EXEMPT DISCLOSURE DOCUMENT AND TRADE PLATFORM OFFERING MEMORANDUM (WHICH CONTAIN A DETAILED DESCRIPTION OF RISK FACTORS). PARTICIPATION IN PRIVATE PLACEMENT PROGRAMS IS ONLY AVAILABLE TO QUALIFIED ELIGIBLE PERSONS. MB Asset Holdings, LLC ("MB Assets") is not a Certified Financial Advisor, Registered Securities Broker, Broker/Dealer and/or a Stock Broker. MB Assets is a business consultancy firm which provides advice to private individuals on or about business matters.


Do it Yourself Principal Protection This sort of principal protection seems like a great idea, and it is. The problem is, the fees can be overwhelming, as much as 2% per year, with even greater fees for getting out of the program prematurely. While you may need the assistance of a financial advisor’s expertise in putting together a principal protection program to invest in the stock market, you can create your own principal protection program for your Private Placement Investments and not pay any such fees for setting it all up. The best way to protect your principal in Private Placement Investments involves the ability to use U.S. Treasuries as collateral for Private Placement Program trades. Treasury bills, or T-bills, are sold in terms ranging from a few days to 52 weeks. T-bills are typically sold at a discount from the par-amount (also called face value). For instance, you might pay $990 for a $1,000 bill. When the bill matures, you would be paid $1,000. The difference between the purchase price and face value is interest. US T-Bills are designed like Zero-coupon bonds, which unlike most bonds, pay no periodic interest as they have zero coupons. Instead, you buy them at discounts below face value. When the bond matures, you receive the full face value, which represents the principal plus interest that has accrued. You can purchase T-bills directly from the U.S. Treasury Department, or through banks and brokers through either competitive or non-competitive bidding. You can hold a bill until it matures or sell it before it matures. T-bills are usually issued in denominations of $1,000, $5,000, $10,000, $25,000, $50,000, $100,000 and $1 million dollars. To illustrate how you could set up your very own principal protection program, in this example using a 1 year U.S. T-Bill, you would purchase the $1,000,000 T-Bill for $997,977.78, and risk only the $2,022.22 left over in your trading. If you lose that amount, you stop trading, and wait till the 1 year is up for the account to be worth your initial level of $1,000,000 again. The problem with using a 1 year T-bill for a principal protection program is that there is only a very small discount to the face value with just 1 year til maturity. You are basically only getting a discount on 1 year's interest. So to really make T-bills work for a principal protection program you need to go out five years or more. Problem is, there is no such thing as a 5 year T-Bill. Using 5, 7, or 10 Year Treasury STRIPS To alleviate the issue that there are no long dated T-bills, we recommend using 5, 7 or 10 year TSTRIPS to construct a principal protection program. STRIPS is an acronym for Separate Trading of Registered Interest and Principal of Securities; a 5 Year T-STRIP is just the principal part of a 5 year bond, and it acts just like a 5 year T-bill would. You could buy it at a deep discount from its face value and it matures over the next five years to that face value. And, here is the best part, you can use T-STRIPS as margin for your Private Placement Investment trades at each of the clearing firms the Private Placement Program works with.

THIS COMMUNICATION IS NOT TO BE CONSTRUED AS AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO PURCHASE ANY SECURITY OR INVEST IN ANY PRIVATE PLACEMENT PROGRAM OR PLATFORM. ANY SUCH OFFER OR SOLICITATION CAN BE MADE ONLY BY MEANS OF AN EXEMPT DISCLOSURE DOCUMENT AND TRADE PLATFORM OFFERING MEMORANDUM (WHICH CONTAIN A DETAILED DESCRIPTION OF RISK FACTORS). PARTICIPATION IN PRIVATE PLACEMENT PROGRAMS IS ONLY AVAILABLE TO QUALIFIED ELIGIBLE PERSONS. MB Asset Holdings, LLC ("MB Assets") is not a Certified Financial Advisor, Registered Securities Broker, Broker/Dealer and/or a Stock Broker. MB Assets is a business consultancy firm which provides advice to private individuals on or about business matters.


Constructing your own Principal Protection Program could turn out something like this; you could buy a $1,000,000, 7 year T-STRIP today for approximately $870,720. That would leave you with $129,280 in the account as risk capital, and a full $900,000 as margin (90% of the total account value). You could trade $1,000,000 in a Private Placement Program with the $900,000 in margin, if you endure a loss of 13% ($129,280) you still end up with your full $1,000,000 in the account after 5 years due to the T-STRIP. Of course, a much better scenario is that the Private Placement Investment Program makes money and then you have in effect gained the full performance of the Private Placement Program on top of the $1,000,000 you get back after 5 years. The ability to use the T-STRIP as margin sets Private Placement Programs well ahead of principal protection programs in other markets, where they can only invest the amount left over from the purchase of the zero coupon bond. In Private Placement Investment Programs, you can invest the entire amount in the Trade Program you desire, AND invest in the T-STRIP simultaneously. Additionally, you can be flexible with your principal protection program and instead of trying to lock in 100% of your initial investment; lock in 120% of it; or, only 80% of it, and so on. You could also layer new T-STRIPS on top of the initial one, booking all new profits back into T-TSTRIPS, and then trading the discount amount, and so on. This flexibility is due to the fact that you are in charge of deciding how much of a T-STRIP to buy, and you choose the Trade Program you want to participate in based on your comfort with the different levels of historical performance and risk as well as the targeted performance and risk. There is no guarantee of your principal. You are merely setting up a way for you to protect the principal. The investor would still have to cease trading in the Private Placement Program, if they wish, when and if the cash amount, the difference between the purchase price of the T-STRIP and the face value, is completely lost. The final caveat is that it would be nearly impossible to entirely cease a Private Placement Program with multiple trading systems and multiple traders on a dime; the losses in the Private Placement Program could overshoot your stop trade point by a decent amount, should the timing not be right. In conclusion, you don't need to pay high fees for a complicated principal protected trade program or fund to get the benefits of a principal protection program. You can create one yourself through a segregated account and 5, 7, or 10 year T-STRIPS. This is a bit more complex than most of our white papers, so please don't hesitate to call us at 888-789-6227 or email info@mbassets.com with any questions you may have on this topic. Resources: T-Strips: http://www.treasurydirect.gov/instit/marketables/strips/strips.htm Wall Street Journal: http://online.wsj.com/mdc/public/page/2_3020-tstrips.html?mod=topnav_2_3010

THIS COMMUNICATION IS NOT TO BE CONSTRUED AS AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO PURCHASE ANY SECURITY OR INVEST IN ANY PRIVATE PLACEMENT PROGRAM OR PLATFORM. ANY SUCH OFFER OR SOLICITATION CAN BE MADE ONLY BY MEANS OF AN EXEMPT DISCLOSURE DOCUMENT AND TRADE PLATFORM OFFERING MEMORANDUM (WHICH CONTAIN A DETAILED DESCRIPTION OF RISK FACTORS). PARTICIPATION IN PRIVATE PLACEMENT PROGRAMS IS ONLY AVAILABLE TO QUALIFIED ELIGIBLE PERSONS. MB Asset Holdings, LLC ("MB Assets") is not a Certified Financial Advisor, Registered Securities Broker, Broker/Dealer and/or a Stock Broker. MB Assets is a business consultancy firm which provides advice to private individuals on or about business matters.


Do It Yourself: Principal Protection for Private Placement Program Investments  

We’ve all heard about risk-less investments. And, contrary to popular belief, in the world of Private Placement Investment Programs, just b...

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