Access Liquidity
How do I turn my Exchange Fund interest into cash?
Collective enables our investors with multiple ways to generate liquidity from their fund interest. Each is tailored to a different use case, providing our investors with maximum flexibility.
Cash Withdrawals
Investors can withdraw their fund interest for cash after a holding period
Bank Loans
Partnering banks lend to our investors using their fund interests as security
LP BuyBacks
Collective will purchase a portion of an investor's fund interest for cash
Cash Withdrawals
Investors can withdraw their fund interest for cash after a holding period
Bank Loans
Partnering banks lend to our investors using their fund interests as security
LP BuyBacks
Collective will purchase a portion of an investor's fund interest for cash
Cash Withdrawals
After an initial holding period, investors may withdraw all or a portion of their Exchange Fund capital accounts in cash at the end of any quarter. There are no fees or charges for withdrawals. The fund's withdrawal obligations in any given quarter are limited to 4% of its assets under management.
Bank Loans
Investors can access immediate liquidity by obtaining loans from partnering banks secured by their Exchange Fund interests. These loans provide cash without triggering a taxable event, allowing investors to retain their fund position while accessing capital. Loan terms, including interest rates and repayment schedules, are determined by the lending bank based on the value of the investor's fund interest serving as collateral. This option is ideal for investors who need liquidity but want to maintain their diversified portfolio exposure and continue benefiting from potential fund appreciation.
LP BuyBacks
Collective also provides liquidity to Exchange Fund investors under its LP BuyBack program. In an LP BuyBack, Collective repurchases up to 50% of the investor's fund interest for cash. To settle the BuyBack, the investor transfers a part of their fund interest upfront back to Collective when they receive the cash and then transfers a second, larger portion three years later. Major advantages of LP BuyBacks include:
Retain Upside: The investor's interest in the fund continues to compound in value during the three year period between initial funding and settlement.
Defer Taxes: The great majority of the taxes are deferred on the cash received until the settlement date three years later.
Non-Recourse: LP BuyBacks are non-recourse to the seller – no matter what happens to the value of their fund interest, they never have to come out of pocket to settle the BuyBack.
Fast & Easy: Compared to stock sales or single stock loans, LP BuyBacks are fast and easy to close – they are typically funded within three days of signing the paperwork.
How an LP BuyBack works
Receive Cash and Make Initial Transfer
You receive up to 50% of the value of your Exchange Fund capital account in an immediate cash advance and transfer back to Collective a portion of your fund interest worth 25% of the cash advance.
Example
If you have a $1,000,000 capital account, you would receive $500,000 in cash within three days of executing the LP BuyBack agreement and transfer $125,000 worth of your fund interest to Collective, leaving you with the cash and an Exchange Fund capital account of $875,000.
Compound the Value of your LP Interest
Depending on the fund's performance, the value of your remaining limited partnership interest grows during the life of the LP BuyBack.
Example
If the Exchange Fund appreciates 15% net of fees annually during the 3-year life of the LP BuyBack, your interest would grow tax deferred into a $1,330,765 capital account at the time of settlement.
Settle the LP Buyback
After three years, settle your BuyBack by transferring a portion of your capital account equal to the amount of the advance plus between 9% - 11% of your capital account, depending on the performance of the fund.
Example
To settle your BuyBack, you would transfer $646,384 worth of your fund interest back to Collective and retain a capital account balance equal to $684,381.
Compare Collective BuyBack to a stock sale
LP BuyBack
Stock Sale
LP BuyBack
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More about LP BuyBacks
No Obligation to Repay
LP BuyBacks are purchases of your limited partnership interest in the Exchange Fund. Your only obligation is to transfer a portion of your LP interest when you enter into the LP BuyBack and again 30-months later. Regardless of the value of the LP interest when these transfers happen, you never have to come out of pocket to repay the cash you received from an LP BuyBack.
Optional Acceleration of Settlement
At any time after the first year, you can opt to accelerate the final delivery of your LP interest and terminate the BuyBack. Once the BuyBack agreement has been terminated and any applicable holding period has ended, you are free to redeem your remaining LP interest for cash at the end of any quarter or choose to let it continue to compound in value in the fund on tax-deferred basis.
Tax Deferral
Exchanges into the fund do not trigger capital gains tax and tax on 75% of the sale proceeds from the LP BuyBack are deferred. This can compare very favorably to a standard stock sale the gains on which can be taxed at state and federal ordinary income rates as high as 46%.
Summary LP BuyBack Terms
Cash Paid: up to 50% of the value of your Exchange Fund partnership interest
Initial Delivery of LP Interest: when you enter into a BuyBack, a portion of your LP capital account equal to 25% of the cash paid to you is transferred to the buyer
Final Delivery of LP Interest: 30 months after entering into the BuyBack, a portion of your LP capital account equal to the cash paid to you plus a Participation Amount (see immediately below) is transferred to the buyer
Participation Amount: an amount equal to between 10% - 12% of your LP capital account depending on the performance of the Exchange Fund
Accelerated Settlement: you can accelerate the final delivery of the LP interest and terminate your BuyBack contract any time after the first year without penalty
Origination Fee: none
Brokerage Commissions: none
