Private companies are generally not accessible to the general public. This is because the private company may be in start up phase or a mature business going to large restructuring. These companies can fail and wipe out the investors. With high risk however also comes with high reward if the private company becomes successful and is acquired or goes to IPO and begin trading publicly. While the general public cannot directly invest in these companies, there are alternative methods to acquire indirect ownership. There are currently a couple of funds that are open to the public that invests in private companies.
ARK Venture Fund
The first is ARK Venture Fund, symbol ARKVX. https://www.ark-funds.com/funds/arkvx#hold. According to its website:
“The ARK Venture Fund (ARKVX) is an actively managed closed-end interval fund that seeks long-term growth of capital by investing both private and public equities securities of companies that are relevant to the Fund’s investment theme of disruptive innovation.”
The fund has $68.8M under management and started in 09/23/2022. It has about 25-50 holdings. It carries a 2.75% management fee and 2.86% other expenses annually. Expense distribution is -2.86%. Total annual fund expenses is 5.76%. Total Fees is 2.90%. It is an internal fund. Unlike ETFs, where you can trade anytime, the internal funds only allow owners to sell quarterly. It is not liquid as stock or ETFs. It is geared towards long term investing. Investors are notified between 42-21 days on how to sell their shares during repurchase offers. For example for 2024, the repurchase dates are 3/28/24, 6/28/24, 9/30/24, and 12/31/24. These dates appear to be quarter end dates.
This fund could be a problem if you need cash quick and the selling window is another three month away and it therefore may not be suitable for some investors.
As of this 10/31/2024 it holds 12.7% SpaceX (Space Exploration Technologies Corp.), 5.51% Epic Games, 5.29% OpenAI, 4.22% Anthropic, 3.65% Dstabricks, 3.33% Tenstorrent Holdings, 1.99% Replit, 1.5% X.AI and others private companies. It also has small amounts of some public companies: .84% Shopify, .75% Robinhood, .69%, .67% Coinbase, Palantir, .50% Tesla, .35% Tempus.AI, .31% Pinterest and a few other public companies. Private companies are 89.52% of the fund.
Another issue with this fund is while it may have winners. Its other holdings can go bankrupt when funding and enthusiasm for a startup wanes. As an example, the Ark Venture Fund has .81% in Axiom Space. This startup wanted to use the ISS to build its own space station but the ISS is being decommissioned two years ahead of original plan. Axiom Space is said to have over hired and struggling to get new investors according to a Forbes report: https://www.youtube.com/watch?v=Hih6LCoTgnA.
The ARK Venture Fund is available for investor with a SoFi Invest account. Minimal investment is $500.
Destiny Tech 100
The second fund that focus on private companies is Destiny Tech 100. It is a closed-end management company that tries to invest in 100 top venture backed private tech companies. It trades as a common stock under DXYZ. https://destiny.xyz/tech100
It has a 2.5% annual management fee and has 22 holdings so far. It currently holds 37.6% SpaceX, 3.5% OpenAI, 2.4% Stripe, 2.4% Chime, 0.4% Plaid and 5.5% cash. According to its 2023 Prospectus, the fund has a $46.4M portfolio. According to its prospectus published December 22, 2023, https://destiny.xyz/tech100/Destiny%20Tech100%20Inc.%20Prospectus.pdf it invested $75,855,309 and it has suffered losses. Its holdings currently has a fair market value of $45,034,020.
Since Destiny Tech 100 trades a common stock, its value can trade above its NAV if there’s a sudden speculation on the value of its underlying holdings. Its shares had gone up recently after the 2024 US Election. These wild price swings can also swing down once enthusiasm wanes.
Baron Partners Fund
Baron Partners Fund (retail: BPTRX) invests in Tesla and SpaceX and a few other companies. As of December 30, 2024, its top ten holdings are 39.1% Tesla, 10% SpaceX, 7.7% Arch Capital Group, 7.0% CoStart Group, 6.3% Hyatt Hotels, 4.4% The Charles Schwab, 4.2% Gartner Group, 3.9% FactSet Research Systems, 3.2% IDEXX Laboratories and 3.1% Vail Resorts. Its net asset is $6.48 Billion. It has a 2.2% total expense ratio. This fund uses leverage to enhance return but that also increases risk. The fund is a high conviction and non diversified fund. They invest in businesses that has real/irreplaceable assets, core growth, disruptive growth, and financials in variety of industries and markets.
Baron Focused Growth Fund
Baron Focused Growth Fund (retail: BFGFX) has overlap with Baron Partners Fund but does not use leverage and has less amount of Tesla. Its top ten holdings are 10.9% Tesla, 7.4% SpaceX, 6.4% Spotify, 5.5% Guardwire Software, 5.3% Interactive Brokerage Group, 4.6% Arch Capital Group, 4.6% Vail Resort, 4.6% On Holdings, 4.2% Hyatt Hotels and 4.0% Shopify. Expense ratio is 1.32%.
Sources:
July 31, 2024 ARK Venture Fund Annual report https://assets.ark-funds.com/media-12243148-2a3e-4996-9763-260f93905eb9/84606d6a-bcb7-4cca-a87c-f9d792207362/ARK%20Venture%20Fund%20Annual%20Report_July%202024.pdf
https://www.baroncapitalgroup.com/product-detail/baron-partners-fund-bptrx#section-overview