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A Way To Own The Next Tech Unicorns

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

Solar ETFs Soar On Tax Credit Extension

Congress’ vote for an environmental tax credit extension on Wednesday helped the solar sector to register healthy gains thereafter. After getting a boost from historical Paris deal, credit extension news set the tone for the solar sector, which is on a track to finish the week on a positive note. ETFs having significant exposure to the solar energy sector are also poised to gain from this scenario. Extension in Focus The legislation approves an additional five years of an investment tax credit (ITC) which will allow solar power companies to keep claiming federal ITC at 30% of the price of solar energy systems which was set earlier to expire at the end of 2016. However, the credit will be slashed gradually to 10% in 2022. Any solar project that starts before the end of 2021 will get the benefit. Moreover, the solar sector is also poised to be benefited from the production tax credit (PTC) extension. The PTC pays 2.3 cents per kilowatt-hour of electricity generated and technically expired at 2014 end due to Congressional gridlock. It has been decided that the PTC will be extended through 2020 but will be gradually reduced over the next four years before being completely phased out. The environmental tax credit extension came as part of the $1.15 trillion federal spending bill which prevented a government shutdown and lifted the 40-year-old ban on exporting American crude oil. The extension initiative along with the historic Paris meet that struck a deal to limit greenhouse gas emissions and shift toward clean energy indicated that investments in clean energy sectors may prove fruitful in the near future. What’s Store for Solar? It has been clearly indicated that most of the nations want the world to be free from pollution and be a better place to live in. This signals that importance and demand of clean energy, including solar, over fossil fuels will increase with time. The Zacks Industry Rank for Solar is #16 out of 257, also confirming the bright prospect of this sector. Meanwhile, recent trends also showed growing demand of solar in the U.S. The Solar Energy Industries Association (SEIA) forecast that 2015 may prove to be a record-breaking year. Installation of 1,361 megawatt DC in the third quarter helped the market to increase installations to 4.1 gigawatt (GW) DC through the first nine months of 2015. Meanwhile, SEIA said: “the extension is likely to add another 140,000 jobs or more.” 2 Solar ETFs to Watch Like solar stocks, solar ETFs also got a massive boost from these developments throughout the week. In this scenario, we have highlighted two solar ETFs that are likely to remain on investors’ radar in the coming months. Guggenheim Solar ETF (NYSEARCA: TAN ) This ETF follows the MAC Global Solar Energy Index, holding 31 stocks in the basket. American firms dominate the fund’s portfolio with nearly 50.9% share, followed by Hong Kong (19.8%) and China (17.5%). The product has amassed $290.9 million in its asset base and trades in moderate volume of around 216,000 shares a day. It charges investors 70 bps in fees per year. The fund has returned 16.8% over the past five trading days. Market Vectors Solar Energy ETF (NYSEARCA: KWT ) This fund manages $18.8 million in its asset base and provides global exposure to 28 solar stocks by tracking the Market Vectors Global Solar Energy Index. In terms of country exposure, the U.S. and China account for the top two countries with 27.5% and 32.9% allocation, respectively, closely followed by Taiwan (20.5%). The product has an expense ratio of 0.65% and sees paltry volume of about 2,000 shares a day. The ETF has returned 15.6% over the past five trading days. Original Post

Managed Futures Funds: Best And Worst Of November

Managed futures funds performed solidly in November, with the Morningstar category gaining 2.68% in the aggregate – the second best month for 2015 behind January. The month’s gains accounted for more than 100% of the entire year’s gains for the category, as its one-year return improved to +2.60% through November 30. Longer term, the managed futures category has underperformed the private fund index as represented by the Credit Suisse Managed Futures Liquid TR USD Index. This is seen in the negative alpha for the category of 2.13% versus the index. However, the group of mutual funds and ETFs included in the category do behave somewhat differently from a risk perspective given the low beta of 0.57 relative to the Credit Suisse index. In this month’s category review, we look at the three best- and worst-performing managed futures funds in November, in terms of their monthly returns, as well as their long-term term performance. As you will note, only three of the funds have track records of 3 years or more. (click to enlarge) Top Performing Funds The best-performing managed futures funds in November were: Each of these funds posted November gains well in excess of the +2.68% category average, and all three solidly outperformed for the year ending November 30, too. Only one of the funds – the Arrow Managed Futures Strategy Fund – had a three-year track record, with annualized gains of 3.65%, and a Sharpe ratio of 0.43 over that time. Broken down, the fund’s long-term returns consisted of a 0.68 beta and -2.57 alpha versus the Credit Suisse index. At +5.92% in November, it was the third-best managed futures mutual fund to own that month, and at +9.14% for the year ending November 30, it trailed only Salient Trend Fund on that basis. Speaking of which, the Salient Trend Fund was the month’s top-performing managed futures mutual fund, with gains of 7.37%. For the year ending November 30, the fund handily beat the category average of +2.60% with gains of 10.65%. The Equinox BH-DG Strategy Fund was November’s second-best performer among managed futures funds, with gains of 7.06%. For the year ending November 30, the fund returned 7.37%, which while being the weakest of the month’s other top funds, was still well in excess of the category average. (click to enlarge) Worst Performing Funds The worst-performing managed futures funds in November were: At -2.19% for the month, the Equinox IPM Systematic Macro Fund was November’s worst-performing managed futures fund. The fund only debuted in July 2015, and thus it doesn’t have longer-term performance data available, but according to Morningstar, $10,000 invested in the fund at its inception would have turned into $9,810 as of November 30, compared to $10,127 for the category as a whole. The Dunham Alternative Strategy and Altegris Macro Strategy funds were both launched more than three years ago, which gives us more return data to analyze. First, for the month of November, the funds posted respective losses of 1.31% and 0.84%. For the year ending November 30, their respective returns were -3.10% and -0.36%. Longer term, DNASX posted three-year annualized gains of 1.16%, while MCRAX had three-year annualized losses of 3.25% through November 30. In terms of three-year beta, alpha, and Sharpe ratios, DNASX definitely looked more attractive. Through November 30, its three-year beta stood at 0.01 – almost entirely uncorrelated with the broader managed futures market – and its alpha stood at 1.16. MCRAX, by contrast, had a three-year beta of 0.46 and -7.55 alpha. The funds’ respective Sharpe ratios stood at 0.23 and -0.52. (click to enlarge) Conclusion Category-wide gains of 2.68% in November come on top of the 1.82% gains from October, which had reversed the prior month’s 1.21% losses. With the Federal Reserve’s long, and much anticipated interest rate increase now complete, the divergence in global interest rate policy is fully under way. December, and 2016, could prove fruitful for the managed futures category as a whole. Past Performance does not necessarily predict future results. Meili Zeng and Jason Seagraves contributed to this article.