What Is a Blind Bid?

Blind bids are investment opportunities that involve bidding on the purchase of a group or lot of securities without really having a clear understanding of what type of assets are included in that group. Considered a high-risk venture, purchasing what is basically a group of securities sight unseen does have the potential for owning some excellent investments that generate a substantial return that easily offsets the costs of the purchase. At the same time, the investor could also end up with a collection of investments that are essentially worthless.

While any investor can engage in a blind bid, institutional investors more often pursue this type of investment opportunity. This is because institutions are usually in a better position to manage the risk level with other assets that do turn a profit. Those institutions may also have more efficient ways of quickly discarding any acquired assets that are not considered desirable, and can even arrange those assets within the portfolio to create some sort of tax advantage. In addition, the bid price for a blind bid of assets is usually very high and out of the range of individual investors, even ones who have a great deal of credit by way of a margin account.

The basics of a blind bid call for the investor to submit a bid for a collection of investments, without any real knowledge of what is included in the collection. In some cases, some very broad data may be provided by the seller, such as indications that the bundle does include securities with some connection to various industries, bond issues, and possibly even some commodities. What is different about this investment opportunity is that there are no specifics provided that will allow the investor to look into the background or past performance of the underlying companies associated with those securities, making the risk assumed by that investor much higher.

Typically, an investor who is willing to go with a blind bid will do so based on the reputation of the entity that is offering the collection of assets for sale. To this end, investors will consider how well others have done with past blind bids in terms of securing at least some assets that make ownership of the entire lot worthwhile. Not considered a good investment approach for those of a more conservative mindset, losing money on this type of venture is not uncommon, even when a few of the assets included in the blind bid turn out to demonstrate a great deal of potential.