IP Scoring Matrix
Private market portfolio design is a different beast, and in my case required a specific tool to keep my asset selection consistent with my investor profile or persona. Investor Persona ("IP") utilizes a simple categorization as follows:
- Growth
- Growth and income
- Income
The trick is to create the self-awareness of which bucket you should reside in. What are your goals, and how can you best sleep at night?
I created the IP Scoring Matrix. Over time, I would expect this to evolve. In the past, my lack of a systematic approach to asset selection has caused a lot of post-investment regrets, not due to the asset itself but the general feeling that my portfolio had become too aggressive for my investment objectives and mental health. Before investing in a new syndication, I will calculate the IP Score for the new investment, and I will also calculate how the new investment impacts my overall portfolio IP Score to ensure I am always moving in the correct direction.
The above example represents a syndication offering for a single multifamily property with a value-add business plan. A score of 3.0 is provided due to the offering being common equity (capital stack), a score of 3.0 is provided since it is a single asset (single vs. fund), and a score of 2.0 is provided for the value-add (project type). The grand total is 8.0, and this would be an appropriate investment for the growth and growth and income investor personas. It is important to note that this project may be acceptable for the income persona, assuming that adding this project to the overall portfolio results in a portfolio average score between 3.0-7.0. Note that the conservative income persona is not represented in Figure 32, and the desire range for this persona would be 3.0-5.0. This system has the main purpose of ensuring you stay honest with yourself and your primary objectives.
