A Way To Own The Next Tech Unicorns

By | December 20, 2015

Scalper1 News

By Tim Maverick What investor wouldn’t want to own a tech unicorn? That is, a technology company, still private, that has a billion dollar-plus valuation based on its fundraising. Initial investors cash in on unicorns in a big way when these companies are either bought out or go public in an IPO. But that’s the realm of Wall Street and venture capital types… right? Wrong! There’s an obscure type of investment, tucked away in a recess of Wall Street, that allows everyday investors to get in on tech unicorns. Closed-End Interval Fund These closed-end interval funds have been in existence since the Investment Company Act of 1940. There are 58 such funds currently active. In effect, a closed-end interval fund is a strange mutual fund. It offers the same transparency and regulatory benefits of a normal mutual fund, and it’s continuously offered and priced every day. But, as the name suggests, closed-end interval funds are highly illiquid. Such a fund can only be sold at specified intervals . In many cases, such a fund can be sold only quarterly, and the fund will only buy back a portion of your shares. Thus, any money invested into such a fund isn’t money you’ll need anytime soon. It has to be very long-term, serious investment money. SharesPost 100 Fund But where do the tech unicorns come in? Well, one closed-end interval fund focuses on private firms that the fund manager believes are just a few years away from going public. In other words, late-stage tech companies. The fund is the SharesPost 100 Fund (MUTF: PRIVX ), and the investment minimum is only $2,500. Just to be clear to readers, I do not own the fund, and I have no affiliation with the fund. SharesPost 100 is currently invested in 31 companies. You can look at the current portfolio here . The fund’s eventual goal is to ramp to holding 70 to 90 names as more people invest. Ultimately, it aims to include more names from the SharesPost 100 list . According to Bloomberg, the fund has $68 million under management. Fund manager Sven Weber told Reuters he’d like to have $200 million under management within two years. Since its inception last year, the fund is up about 25%. But it hasn’t been very active recently, since the market for such companies has cooled in the past few months. It’s important to note that the fund will offer to buy back 5% of the outstanding shares from shareholders each quarter. If more than 5% of the shareholders want to bail out, they’d receive a pro-rated amount of the quantity they wanted to actually sell. The fund can suspend redemption privileges, as well. SharesPost also charges a sales load of 5.75% on amounts under $50,000, though the load drops as you invest more money. There’s also an advisory fee of 1.9%. So there you have it – a way to invest in tech unicorns, albeit one with a few warts. Personally, I could handle the fees and the risk of owning these shares, but the illiquidity is a big hang-up. What do you think? Leave us your thoughts in the comments section. And if you do decide to invest in the fund, please read the prospectus for a full look at the risks involved. Original post Scalper1 News

Scalper1 News