The world of investing in private companies

There is intense interest in trying to access the shares of tech companies that are still private like SpaceX and Open AI. A closed end fund, Destiny Tech 100 recently began trading on the NYSE and is trading at a rather large premium to its net asset value. But are there other ways to access private tech equity? Let’s talk with Brett Winton. He’s the chief futurist at Arc Investment of Brett. You and Kathy Wood launched the Arc Venture Fund in 2022. Now, this is an interval fund that also invests in private tech companies like SpaceX, Open AI, Epic Games, and you also own some public companies like Coinbase and Robin Hood. You just published a paper claiming this interval fund is a superior way to invest in private companies. Can you explain to us why it’s superior? Yeah. An interval fund allows you to invest daily or at the underlying value of the assets in the fund and then you can redeem on a quarterly basis. And so it allows for efficient allocation to illiquid assets like venture innovation companies. So and I just want to make sure the the viewer understands this. With an interval fund, you can buy at any time at the net asset value and you can sell to the company at a set time on a quarterly basis. Is that right? That’s how it works. Yeah, exactly. And so it’s the right product for exposing yourself to less liquid assets like venture type companies. So as opposed to a closed in fund structure where you may be investing $100, but there’s only $25.00 of underlying exposures in that investment. So you’re really buying $0.25 or $25 for $100.00. An interval fund allows you to buy your the amount you you invest is identical to the value of the underlying, right. So it addresses the problem of trading at a premium or discount to the net asset value. You’re always buying at the net asset value, is that correct? Exactly. Exactly. And that’s why we chose that fund structure because we think it’s the better way to get access to venture exposures for everyday investors, right. So why does the fund own both private and public companies? You own some public companies here, like Coinbase, for example. Yeah. So the, the public part of the book is intended to allow us to meet quarterly redemptions. And so we maintain a public part of the book for kind of liquidity purposes, but the majority of the exposure is in private venture companies like Open AI and SpaceX. And just quickly explain why, why can’t we just solve this whole problem and just float an ETF with these private shares underneath them? What what, what is the the problem with doing that? Yeah, with an ETF, which, you know, we think is a great wrapper for public equities, you wouldn’t be able to accommodate exposures to illiquid assets like venture products. You you can’t, you know, buy or sell a private company on a daily basis to meet the redemptions and demand on an ETF basis. OK, thank you. Much more coming up on how to invest in private tech equity. That’s coming up on ETF edge at 1:10 PM Eastern Time. Brett will be joined by Howie Ning from Forge Global, which recently launched an investable index of venture backed private tech companies. Also joining us, Nicholas Coles from Datatribe. That’s ETF edge.cnbc.com.