Help clients with tax-efficient diversification

The main benefit is tax-advantaged diversification. Overexposure to a single company stock means higher risk, more volatility, and statistically less growth.

The probability of any stock outperforming the market is low. In 2022, only 12% of stocks in the Nasdaq-100 index significantly outperformed the index, and only 1% outperformed the index by more than 50%.

On a longer timespan, index funds have had higher risk-adjusted returns than all but a handful of stocks. The average equity investor underperformed the S&P 500 by 4.32% over the 20 year period from 1992–2011. Since 2002, over 80% of QQQ stocks underperformed the index over a 5-year period, and 85% underperformed over a 7-year period.

With Cache, you’ll exchange your equity for a diverse set of investments, all without triggering taxes. This tax deferral ensures that the full value of your equity stays invested in the market, compounding over time. Assuming historic stock returns, this adds to a sizable advantage over time.

Exchange Funds shouldn't be confused with Exchange-Traded Funds (ETFs). While ETFs are publicly traded and widely accessible, exchange funds are private funds similar to hedge funds or VC funds that have been out-of-reach for most people. Exchange funds have been offered by large investment firms since the 1960s, but they've only been accessible by the ultra-wealthy.

We've rethought this financial instrument from the ground up, turning a mostly manually run operation into a highly precise and automated solution accessible to a much larger audience.

Once investors have signed-off on their contributions, the stocks are pooled in a fund registered as a Delaware Limited Partnership. Our independent third-party fund administrator will set the Net Asset Value for the fund, which helps determine each investor's percentage ownership. Certain qualifying asset investments, such as real estate investments, are made to ensure compliance with the regulatory requirements of an exchange fund.

Fund shares will be issued through our transfer agent and show up on your Cache brokerage account. The fund assets will be held at BNY Mellon, an institution with decades of experience in asset custody.

If your client holds a tech stock that seems to correlate with the Nasdaq-100, they are able to trade their single-stock risk to a diversified exposure while maintaining a similar return profile with the Cache Exchange Fund.

Elimination of business risk and concentration risk, while maintaining a similar upside.

You'd have helped your client achieve tax efficiency with the Nasdaq-100 allocation of their portfolio, while diversifying the rest into broader sectors using other methods.

Yes, you can contribute vested stocks from multiple companies.

Like any private funds, such as hedge funds or VC funds, there are no public exchanges for these shares. Fund shares will be redeemed by Cache only, or through the custodian and fund administrator in the event that Cache is no longer operational. Fund shares can be transferred through gifts or inheritances.

Yes, Cache allows legal entities such as trusts and LLCs to register for a brokerage account, and participate in the Exchange Funds.

Even if you don’t meet the minimum, you can reserve a spot. Our team will be able to waive the minimum on a case-by-case basis for select stocks that help with overall investment objectives.

Probably, but it depends on the company’s policy and their position in the company. We’ll make sure they’re eligible to participate before they contribute and help you understand their company policies. The good news is, many large firms have friendly policies.

Generally, we encourage companies to follow the standards set by Apple. In their 2022 Proxy Statement, they include, "We allow for certain portfolio diversification transactions, such as investments in exchange funds."

No, we can only accept fully vested stocks. Exchange funds are a good fit if they have taxable gains on those holdings.

At redemption, we’ll distribute a diversified basket of stocks to each investor, while matching their ownership percentage and cost basis, so long as investors have met the minimum investment timeframe. We don’t charge any redemption fees.

All our exchange funds are perpetual-life vehicles, which means they will continue to grow in a tax-deferred manner, even after seven years. You can also roll over your redemptions to another exchange fund.

We institute a two-year lockup on the shares contributed to the fund and generally encourage long-term investors to participate. The reason: each pool is carefully weighted to achieve certain investment goals, and redemptions hurt your fellow investors. If you have short-term liquidity needs, this investment is not for you.

To gain the full benefits of the exchange fund, regulations require a seven-year holding period. Redemption requests after the lockup but before the seven-year mark are satisfied by distributing your original contribution back to you at a rate that is the lower of the contributed stock value at the time of redemption or the value of your fund shares based on the fund’s net asset value. The rest is retained until term commitments are met. Note that early redemptions incur a 2% penalty fee. Please refer to the fund documents for a full set of redemption terms.

Our "retail" pricing is expected to be as follows (pending fund offering):
$100K+ - 0.8% management fee
$250K+ - 0.65% management fee
$500K+ - 0.6% management fee
$1M+ - 0.5% management fee
Advisory fees are charged on gross asset values struck by the fund administrator.

For our RIA partners, we offer the ability to access discounts on management fees for your clients based on the total assets you bring across your client base.