Reduce Risk
How can I reduce financial risk and protect my wealth?
Exchange shares tax–deferred for an interest in the Exchange Fund's diversified portfolio of leading pre-IPO companies. The value of a diversified portfolio is substantially less volatile than a single stock.
Over-concentration is risky
When the bulk of your net worth is concentrated in a single private growth company's stock, you are exposed to significant financial risk and volatility.
Reduce risk by diversifying
Reduce your risk by exchanging stock tax-free for a partnership interest in the Collective Exchange Fund, a diversified portfolio of leading unicorns.
Generate long term wealth
Build wealth by compounding your tax savings in the Exchange Fund at venture capital rates of return over the long term.
Over-concentration is risky
When the bulk of your net worth is concentrated in a single private growth company's stock, you are exposed to significant financial risk and volatility.
Reduce risk by diversifying
Reduce your risk by exchanging stock tax-free for a partnership interest in the Collective Exchange Fund, a diversified portfolio of leading unicorns.
Generate long term wealth
Build wealth by compounding your tax savings in the Exchange Fund at venture capital rates of return over the long term.
Why diversify to avoid over concentration?
When the bulk of your net worth is concentrated in a single private company's stock, you are exposed to significant financial risk. Though most unicorn employees are excited about their company's future prospects, they also know that the values of high growth, technology companies are extremely volatile (i.e., risky).
The value of a single private tech company is highly volatile
A diversified portfolio is much less risky; a loss in one company has limited impact and is offset by gains on other companies
Collective enables tax-free exchanges of single company stock for a partnership interest in a portfolio of leading unicorns
Swap Binary Outcomes for Predictable Returns
A decade after closing their Series C rounds, only 38% of these companies exited for more than their C round's valuation.
BUT, if you invested in each of their C rounds, you would have earned a ~5X multiple*.
Conclusion:
Diversification is the key to protecting and growing your pre-IPO company wealth.
Diversification Strategy
The Collective Late-Stage Exchange Fund seeks to reduce the risk of its limited partners by holding a diversified portfolio of private, venture-backed companies. Over the long term, the Fund will target a portfolio of ~100 pre-IPO companies diversified across technology and growth sectors. To preserve the Fund's favorable tax treatment for exchangers under the U.S. tax code and enhance its diversification benefits, the Fund also holds a small portion of its assets in real estate investments. The Fund's real estate investments are generally professionally managed investment vehicles holding mature, stable properties diversified across type (e.g., residential, industrial, etc.) and across U.S. regions.
How an Exchange Fund works
The Collective Late-Stage Exchange Fund is a pooled investment vehicle enabling shareholders in selected private growth companies to contribute their shares into the Fund without triggering a capital gains tax. In return, they receive a limited partnership interest in the Fund of equal value. So, for every $100,000 worth of shares contributed into the Fund, the shareholder receives a $100,000 limited partnership in the Fund.
What the experts say
Diversification is the only free lunch in finance.
Harry Markowitz, Nobel Prize-winning economist
The riskiest moment is when you're right. That's when you're in the most danger of overconfidence. Diversification is a recognition of our ignorance.
Peter Bernstein, Economic Historian, Author of Against the Gods
The only way to reduce risk and capture returns across time is to diversify broadly.
David Swensen, Yale Endowment CIO, pioneer of the “Endowment Model”
Eligible Company Sectors
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(Answer: by more than half)Mitigating Financial Risk Through Diversification: The Collective Exchange Fund's Impact on Portfolio Volatility