Ep 175: How to Build a Customizable Fund with Badri Malynur

You as a fund manager or a lead investor can keep a portion of that split legally and then pass the risk to your investors. And your investors are still getting a good deal. So that's the value of what we bring. We not only bring you deals, we bring you all the capabilities built to run and execute your own fund where you can be a lead investor whether you're doing your own deals or you're raising money for others.

Welcome to the Next Level Income show where it's our goal to take your income, your investments and your life to the next level. I'm your host Chris Larsen. If you haven't yet, get a copy of our book for free at our website nextlevelincome.com. that's www.nextlevelincome.com. just click on the book link and I'll even send you a copy if.

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On today's show we have Badri Mulliner Baadri is a co founder and VP at Avestor Inc. A technology platform focused.

On end to end solution for sponsors to build customizable private funds. Badri has extensive extensive investment experience spinning a large variety of assets including real estate, stocks, bonds, cryptocurrencies, commodities options and angel investing. He has co founded two startups and has extensive management experience leading large teams at a Fortune 500 company. He has an MBA in marketing and finance and a master's in computer science. Today Baudry and I are going to talk about how we built a customizable fund for our investors here at Next Level Income and we're going to share some more info with that with you today. B welcome to the show.

Hey, thank you for having me. Chris. Good to see you again.

Yeah, it's great to see you again as well and I'm really excited to share a little bit more about what you've been up to at Avestor. I've been talking to you for about a year now, but we got some exciting news that we're going to share on today's podcast. We've kind of been sharing it with our investors already. But Audrey, I'd love for you to share a little bit more about your background. We were chatting before the show, kind of about your history before you got to. Yeah, before you got here. And love for you to share that with the audience too.

Absolutely, I would love to do that. I originally came from India and I came to Oregon. I loved it. I went to I'm a duck. I'm still waiting for us to win our first national championship. But we'll get there one of these days.

Getting better. Your team's getting better.

Team is getting better. Team is getting better. And so State bank was in corporate America, was an exec in a Fortune 500 company before really quit the corporate life almost more than 15 years back. And I really. Startups have always fascinated me. I did my first startup, not very successful when I was in my early 20s and I've been experimenting with different startups. I've been in different startups on different exits. I ran a trading company and now my latest venture is Sylvester. I also ran a hedge fund for trading index stock options. And my latest venture is Sylvester, which I'm sure we'll talk a little more about. So that's my background just on a slightly personal front. If there is one takeaway from this, if people want to remember who this guy was, my goal is to visit every country in the world. I've been to about 70 countries, love traveling, love hiking and love tennis. There you go. Maybe a longer intro than you want.

Oh no, that was just fine. And yeah, we'd love to host you here in Asheville, North Carolina. Come out, stay with us and do some hiking. Yeah and I got to get to Oregon. My wife and I love, love wines from Pinot's from you. Sure you should.

I wish you had made it to the summit that we had a great time. There was avastar fund manager summit. People had a good time and very educational and had a good time. So next time, next summit, you should.

Definitely make it next year. Yeah, we'll make it. We'll make it a date for sure. You know what's, what's what I love Baudry is you and your team at Avestor have utilized technology which we're seeing now. Right. It's ubiquitous to really impact the private equity space. And one of the reasons that we started Next Level Income is that we wanted to share these investments with investors because a lot of this stuff was really kind of held closely by family offices, ultra high net worth families and know as I shared my book so many people said wow, I had no idea this existed. Like I knew you could buy a house but I didn't know you could invest in an apartment building or mobile home parks as you know we were talking about earlier and now with technology we're making it even more even, even easier as we move to that. Can you tell the, tell a little bit about the story about the background? What inspired you to fund Aestor to Found. I'm sorry Found Investor Foundation.

So let's start with. Let's start off from the point where in what you mentioned, I think Wall street has really done a number on people. Oh, the only thing you can do is invest in stocks and bonds and you have a 6040 portfolio and you're all set, 60% stocks, 40% bonds. We all know what bonds have been doing in the last three years. Private investments is a very opaque space and it's a multi trillion dollar market. I don't know if your audience knows this. I think I don't have the exact number. But more than $4 trillion were raised in private reg day offerings. We'll talk about the terminology in a little bit. And what is really, really important for wealth building and preservation, both building and preservation is a diversified portfolio which should really consist of multiple things. I mean it should absolutely consist in consist of stocks and bonds. I'm not saying take all your money away from that. It should also consist of real estate and maybe commodities and maybe a little bit of startup investing if you're into that. But real estate investments should be an integral part of your portfolio. And what we found. I'm coming to the question before you think I've forgotten your question. We found that it's very, very complex for investors to invest in the private space. I think you'll relate to this. It should not be that complex. I mean people have to go register in various sites and they have to evaluate various investments and they have to do a lot of research which they're not equipped to. And the minimum investment may be 2550 and sometimes even $100,000. And some of these investments go very fast. So we wanted to simplify that space for private investors. We wanted to bring the ease of a stock brokerage account. Just like you go to Schwab or TD Ameritrade or you know, your favorite stock brokerage stock broker and open an account, put in $100,000 or $50,000 and pick and choose which stock you want. We wanted to bring that stock brokerage account experience to the private investing market where you can invest in real estate and a variety of other type of asset classes and where people can put smaller slices as opposed to putting large amounts. And the people have the ability to build diversified portfolios across multiple asset classes, multiple time frames and multiple geographies. So that's what we are trying to do. And that's why Avestor was formed, actually.

Yeah, no, I love the concept and I think you've really hit an intersection. I mean, I remember the first. This is going back over a Decade now. The first private placement we invested in, you know, just the. The reams of paper we printed out, all the signatures, all the forms we had to fill out by hand and, you know, send it in via FedEx. And then it's like, oh, you can docusign things. And, you know, it's. The technology is making it easier and easier. And I think it's. Again, I said, I think you've really hit at this intersection because as we see the baby boomers, you know, get older and they're starting this transfer of wealth, it's what, around 16, $20 trillion and. Yeah, I'm sorry, it's 80. I'm sorry, $80 trillion.

$80 trillion. Yeah.

60 to 80. Yeah, it's going. Yes, it's going up. As, you know, the stock market and asset prices have increased, but that wealth is being transferred to millennials. And we see millennials are very comfortable with things like Robinhood, you know, so you give them. You know, you give a. And I'm, you know, I'm not too far from millennials, but, you know, you give. You give somebody a stack of paper like this that's used to going on their phone and purchasing stocks and small quantities and trading that. That's a whole barrier to do that. So it seems like you guys have really hit the intersection in terms of where we are socially with, you know, also with what you're looking to do from a. Yeah, yeah.

I think the timing is for teachers. I mean, people want to go beyond just stocks and bonds. And so, you know, as. Especially when a lot of the inherit comes from the baby boomers to Gen X and Gen Y, they're willing to take a little more risk and they want to build a diversified portfolio. So the timing is good. I agree with you, Chris.

Yeah. And it's interesting you say that because you said, hey, you think we should have private equity investments and then that Gen X and Gen Y is interested in taking more risk. You know, if you look at the smartest money out there, you know, you look at the endowment funds, you look at family offices, they're putting 20, sometimes 30% of their. Of their family's money into.

It's actually taking more risk. It's building more of a balanced portfolio.

I mean, that's. That's a good. Yeah, yeah. And it's so, you know, being able to give people that option in a very comfortable way, I think is. Is fantastic. So, you know, there are some other options out there. How is a vestor different?

Okay, great question. So the fundamental innovation Which Avestor has brought to the marketplace is something called a customizable fund. A customizable fund is a fund where you can go and pick and choose which deals you want. And a fund manager can build a custom portfolio for each investor. Let's face it, you may have different needs. I don't know how old your kids are, but my kids are graduated from college, so I don't have to worry about college education anymore.

Minor 11 and 13.

Yeah, okay, well, you have to start worrying about college education. So different people are at different stages of their life. And it's very important for investors to have the ability to build a custom portfolio. And that's what a customizable fund offers. It's like, think of it like at a very simplistic level. You go to a Fidelity fund and say, you know, I like the out of the hundred stocks here, I like the 60 stocks. I don't want to really buy those 40 stocks. You can't do that, can you? I don't think so. But you can do that precisely in this private fund market using a customizable fund, where investors can come in and tell the fund manager, you know, I have a kid going to college in four years, and I want some of my investments, 50% of my investments to be liquid in four years. And I am not so excited about California. I mean, I'm just making it up, but hey, why not? It's a good state to pick on.

Fair. Fair.

I want to invest more in the Sun Belt and I want to get. I'm already in a high income. I want to get depreciation benefits so I can offset my other regular income. So each investor has different needs. And a customiz fund allows the fund manager to build a custom portfolio. Again, I will repeat what I said across multiple asset classes, multiple time frames, and multiple geographies to precisely meet the needs of each individual investor. So that's the key differentiation of the Avestra platform.

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Yeah, no, I love that. And that's what, that's what drew us towards your company, Baudry, is that, you know, we can take this technology that's helping investors suit their needs in a better way and, and allow them access to this space, but allow them to do it in a way that suits their needs better than, you know.

Thank you. I'm very excited to have you, Chris, and congratulations on launching your fund or almost launching your fund. And tell me a little bit about some of the deals you're going to put in your fund so we can illustrate that as an example of a customizable fund.

Yeah. And I know we've talked about this with the team, so for the audience, I've come at it as an investor kind of like you did Badri with the platform. Said like, hey, what would I want? How can we make this work? So I've looked at different asset classes based upon the real estate cycle. And, you know, we, we started in the multifamily space, added self storage, added mobile home parks, added hotels, car washes, and we're working on a senior housing partnership as well. So the challenge is. Yeah, and we have, we have a debt fund. You know, it's, it's got liquidity provision in there. So investors say, what are you doing.

Your spare time, Chris? Yeah, no, just kidding.

It looks like I, I coach my son's cycling team. And yeah, I just, I try to, I try to box with father time here, but, yeah, so, you know, fortunately, I have great operating partners, Baudry. But, you know, one of the questions I get, you know, investors, a new investor will look and say, well, Chris, like, okay, I see you've built your portfolio over the course of 10 years and you've kind of stacked these. But, you know, what do I invest in? And we don't give, you know, we don't give investing advice. We're not investment advisors. But it's hard when you say, well, hey, you could, you could pick and choose, you know, from these. So, you know, our goal in working with you was, was working with a platform that makes it easier for investors, one, to get registered to, to go through the process of placing their investment dollars, but then also, three, being able to get the diversification that they've had. So, yeah, so we're trying to accomplish all those things in conjunction with your platform and, you know, we're looking forward to rolling that out. Here is, this is kind of right, right on time as we, as we do our first release here this month.

Very Cool. Very cool. And some other benefits from using a platform like this and for your fund as well. Today, when you invest in a deal, if there are any distributions that go back to your bank account and if there's a liquidation that you have to go back to your bank account, I mean, if there is an exit and if you want to invest in a new deal, you have to sign another 40 page document. So what just to. Some of the benefits of investing in a fund like the ones you're creating, a customizable fund, is that we tie all of those pieces together into a single platform. You sign one legal document to start with and then because each time there is something called a private placement memorandum, many of your investors may be familiar with it for each deal, instead of signing a 40 page deal or ppm for each.

That's a short one, by the way. 40 is pretty short.

That's a short one. Yeah.

Maybe like 140 pages. Yeah.

You know, life is too short to read a 50, 60 page document every time you're investing a little amount. So what we have done is we have distilled all of that into. You do sign that 40 page ppm when you join the fund. But then for each deal you invest, we have distilled that into something called a deal disclosure document, which very clearly indicates what are the terms of the deal, what are any additional specific risks associated with the deal. So that makes the investing process very easy. With a click of a button, we have something called a virtual cash balance. Just like a stock brokerage account. Think of this like a stock brokerage account for your alternative investments we have something called a virtual cash balance, where if you can store your money in, you can put periodic investments if you want, put thousand, $2,000 every month. And when distributions come in, they go into the virtual cash balance and with a click of a button you can choose a new investment. And everything is integrated electronic signing capability. And for some of these investments you have to be an accredited investor. All that capability, everything is integrated into the platform. So we try to make it very, very easy for you to invest in alternative investments like the ones you provide. It could be senior housing, mobile home parks, and we make it very easy for you to do that. So.

No, it's great. One of the other things I enjoy about your team Badri is that you're open to feedback. So if you say, hey, this is a feature that would make sense. I was on a call last week with a member of your team and they said, hang on, I'm going to take some notes. And they took notes and said, hey, this is something I'm going to talk to the engineers about incorporating. So you don't get that with Fidelity.

No, you don't. No, you don't. We are a very agile team and we are very open to customer, fund manager and end investor feedback. And a lot of our features have grown from feedback from end investors and fund managers like you, Chris.

Yeah, no, that's great. Can you share anything that may be on the horizon with respect to features or things that may be coming?

So we are constantly innovating on both the sponsor side and the investor side. The sponsor side is for the fund manager like you. And so we just recently launched our next generation UI which integrates all the things which an investor might need. And now we are working on the next generation sponsor UI which makes the fund manager easy. And it's important to make the fund manager life easier too, because then they can bring more deals like you're doing. Instead of spending more time on the administration side, you can bring more deals to the platform and to expose your investors to a wide range of asset classes.

So, yeah, I can tell you that my least favorite thing to do is deal with, you know, all the paperwork and process behind the scenes when it comes to these platforms because it really, yeah, it really, it really pulls you away from doing what matters, which is the due diligence, the, the, you know, the management, the asset management side of things. So now you mentioned something interesting, Baadri. You know, you talk about the sponsors. I know we've talked about this as well. One thing that you see is investors sometimes like to get together, they like to pull capital. Maybe even an investor says, hey, I'd like to go out and pull some capital together and bring it to an investment. How can an investor work with the Avestor platform to set up their own fund if they wanted to do that?

Oh yeah, that's a good point. We often get people who are what we call lead investors. I mean, they're influential in their friends and family and sometimes their friends and family come in and say, hey, I like what you are doing. Can I get in on it? And there are. This is a highly regulated industry. I'm sure you know this. You cannot just raise money from others, even if it's friends and family, without an exemption.

And you can, you can raise money but you can't be paid for it. Right? So yeah, you can go out and say, yeah, just out of the good of your heart.

So what we have done is built a Platform, which makes it very easy for you when I say you, you as a lead investor or you as a syndicator doing your own real estate deals to raise capital for others by providing all the services you need to launch a fund, including the legal piece, the compliance piece, the accounting piece, the tax piece, the platform and all the various services for checking investor accreditation and so on in one P1 place and to talk. So running a fund is like running a business, right Chris?

Absolutely.

So you need three things to run a business. What do you need? You need customers. You need something, you're selling your product and customers. Yeah, exactly. So what we do is we provide all those pieces. We can help you develop your fund, help you develop marketing collateral. And here is the most important piece. We actually go to top tier sponsors across the country and negotiate preferred deals for fund managers. And you as an investor and a fund manager will benefit from the negotiations we do. Since we have more than 100 funds, we can go to somebody. For example, we have a relationship with a short term rental fund and we have negotiated terms where you get a 9% preference and a 9010 split. So you as a fund manager or a lead investor can keep a portion of that split legally and then pass the risk to your investors. And your investors are still getting a good deal. So that's the value of what we bring. We not only bring you deals, we bring you all the capabilities built to run and execute your own fund where you can be a lead investor, whether you're doing your own deals or you're raising money for others.

Yeah, I think that's a great point. So for any of our investors that are listening, a lot of times we have tiers. So if you invest say a half a million or a million dollars, like you said badri, you may get preferred terms. It's like, you know, it's like almost anything in the world, right? You say, hey, I'm going to, I'm going to buy more of a product. I'm going to be a more loyal customer. We're going to have a partnership. Yeah, Typically you get a discount, you get a better deal. So what you've done is you've actually set up a structure so it makes it turnkey. For somebody that wants to go and do this and, and do that now there's still work involved, right. But we, we actually have, we have investors that do this. They've set up an LLC to pull their, say, investor club's capital together to invest in a deal. They manage all that. This could be a great solution for them.

It sounds like it will completely streamline that process. Instead of creating a separate LLC for each deal, you create one evergreen fund and you can invest in any number of deals and then you can lower the minimum. So maybe you invest half a million dollars and get preferred terms and then maybe your investors can invest as little as 10 or $20,000, but they're getting the benefit of the preferred terms minus whatever percentage you keep.

So yeah, no, I think it's fantastic. Baudry. No, I really appreciate this. I appreciate you sharing it with the audience. We're going to use this. We're going to share it for any of our investors that are familiarizing themselves with the platform, as well as share it on the podcast platforms out there as well. Baadhrei, where's the best place for investors to learn more about your platform if they want to go and see, hey, this is something that I might be interested for doing myself.

The best place is our website. We have a marketplace of various funds and I'm sure your fund will be added there very soon. If you could go to Avastir Inc.com that is a V E S-O R I N C.com, you'll find a ton of information about customizable funds. And I'm sure you're going to include some information about customizable funds in your website pretty soon, Chris. So your website would be a good place when you launch your fund. And because a customizable fund, believe me, is a game changer for you as an investor because instead of restricting yourself to what a fund manager picks, now you can pick and choose deals. You can choose a timeframe which is summonable to you. You can choose something where you want a little more risk or you want less risk and more cash flow, you want more tax benefits so you can really build again, I don't want to rehash this to death, but you can build your own custom portfolio which is precisely tailored towards your needs. So it's a game changer. Next time you make a private investment, don't do it outside a customizable fund.

I love it. And yeah, look, Next Level Income was founded to help you achieve financial independence through education and investment opportunities. And we're making it easier, with the help of Avestor, for you to do just that. Badri, thanks for sharing your story. Thanks for sharing what Avester is up to and thanks for helping our team put this together today.

Thank you. Chris, congratulations again on almost launching your fund right, and you're getting very close to the finish. Line here and I wish you the very best luck. Best of luck with your first deal. Your first deal looks amazing and I would certainly encourage your listeners to look out for your first deal and see if that's a fit for their portfolio.

Thank you sir. Good to see you today, Vadri.

Hey Chris, here again. I hope you found this episode valuable. Now I have one more thing to gift you. We have a page for my coaching clients where you can get a free copy of my book as well as much more from previous guests on the show. Just check out nextlevelincome.com coaching to get a free copy of my book, audiobook, and much more. I'll send you a copy of my book and cover all the shipping costs as a thank you for listening to the podcast. Also, please like share and take just 90 seconds to give us a rating on Apple Podcasts.