A private placement program (PPP) is a particular type of investment that allows access to the marketplace for trading bank assets, most commonly Medium Term Notes (MTN’s). Medium Term Notes are essentially debt notes that allow banks and other institutions to lend to customers. These debt notes initiate from governing bodies and are released to a small number of major banks at a discounted rate. From here the MTN’s can be openly traded between banks, pensions funds and other financial instituitions. Because they are released at a discounted price, there is an opportunity to buy MTN’s and sell them for a profit. The profit may only be small in % terms, but as several trades can potentially be made in a week, or even within a day, the returns can quickly accumulate. Because the trade of Medium Term Notes is essentially using arbitrage (buying for a low cost and selling for a profit) and due to the nature of transactions already having a buyer in place, the trades are very safe and considered to be low risk (assuming the platform itself is genuine).
In a more “real world” example, the process is like an investor buying a car for $1,000 and selling it for $1,500, making a $500 profit. The person trading the car knows they will make a profit, and before they even spend the $1,000 to buy the car, they have an agreement to sell it for $1,500 so they know they will not be left holding the car without a buyer. This is why the risk of this type of investment is so low as long as the trading platform is legitimate. It also explains how the returns can be so high and why it should be considered as completely different to the trading of other assets, such as buying and selling stocks for example.
Leverage is also a key component of the high returns delivered by a bullet provide placement program. The minimum collateral required to access the MTN arena is $100,000,000 and yet you will see repeatedly that I have talked about $10million (or potentially even $1million) being the minimum. This is because a $10million asset such as cash can be leveraged to take the total sum available to trade with is $100million.
Now that we understand how the PPP marketplace works and the importance of leverage, it’s easy to see how returns of up to 100% per week can be achieved in a bullet trade.
Example: As an example, let’s assume an investor has $10,000,000 to invest in a bullet trade private placement program. This $10m is leveraged to $100,000,000 and the investor now has access to the market and can buy and sell Medium Term Notes. As a purely indicative return, if we presume that MTNs can be traded for a 1% profit, this would result in a return of $1million per traded MTN, which is in fact 10% return for the investor (i.e. $1million return on $10million invested is a 10% return). Now, if we also assume that 2 trades per day are made during the initial bullet trade, this is 10 trades for the week at 20% return each, which means at the end of the week the investor has a made 100% profit.
It’s important to note here that all of these figures are purely indicative, and investors shouldn’t take these returns for granted. Often, it will be agreed at the outset what the expected returns are based on various factors including the amount invested, the type of trade, the term of the trade agreement and so on.
Asset Types Accepted In A Trade
This can vary, but there are many different types of asset that be used as collateral to enter a PPP trade. Some of these include;
Are PPP’s A Scam?
As you can understand from the above, whilst PPP’s are genuine, there are still ways that an investor can get scammed and lose money. The most common type of scam is to be tricked into investing in a fake program. With so many millions of dollars’ worth of assets at stake, it’s easy to see how it can attract people who would pray on potential investors. An investor should always remember to do extensive due diligence on a trader and not pay any large upfront fees. Most investors are also able to keep the funds in their name and only use the invested assets as collateral, so sending funds to a third party is not required (although for smaller investors of $1m to $10m then it might be necessary to put funds in a collective account).
Definitions And Variations
There are some terms and abbreviations that occur when discussing private placement programs. To help to demystify some of these terms, here is a summary of terms and a brief definition.
These are some terms that are often used when referring to a Private Placement Program, although some of them can refer to different things so be careful if these terms are being used that it is the same as the type of trade being discussed in this article;
Tear Sheet Program – refers to a document (tear sheet) that provides proof of assets or funds. Tear sheet private placement programs are a myth though and they do not exist.
SBLC – Stand By letters Of Credit’s are often use as an instrument to facilitate a PPP trade.
Project funding – PPP’s must provide a good percentage of returns to approved projects. The investor may have a project of their own, or the trader may provide one.
MT760 – for example “block by MT760”. This is a type of SWIFT Message and can be used to demonstrate a guarantee, i.e. of investor funds.
Small Cap / Low Entry Private Placement Program
Typically, access to a PPP investment starts at $10,000,000. However, it might be possible to get access for small cap investors with $1,000,000 and if you fall into this category please contact us and we will introduce you to the broker who can explain more about the low entry private placement program. Returns are not quite as high with small cap private placement programs but often times can be in excess of 100% or more and will outperform pretty much anything else out there.
The views expressed on this article/website are opinion only and we are not a regulated financial advisor. As with everything on this website, all information is based on our own understanding of these investment products and are unverified by any accredited or regulated bodies. You should conduct your own research and due diligence before entering into any type of investment or trade. We does not accept responsibility for losses incurred as a result of information provided here or by our representatives.