A fund in the United States that offers “public access” to private technology has seen its value soar amid investor fervor for its unlisted investments.
Investors clamoring for exposure to the fund’s private holdings such as Elon Musk’s SpaceX and OpenAI (the developer of ChatGPT) have boosted the fortunes in stark contrast to the floundering fortunes London’s Technology Investment Trusts.
The 351-million fund’s shares hit a 2,000% premium over their net asset value in this month. The shares closed Friday at $28.39 – a 487 percent premium over the net asset value per share of $4.84.
Despite the fact that it has dropped in price, it is still well above its initial listing price of $8.25 last month.
Investors have also taken an interest in the US Tech Fund’s investment in ChatGPT developer OpenAI.
The fund’s enthusiasm, founded by Sohail Prsad, the chief executive, contrasts sharply with the London Market, where large listed technology funds, with portfolios similar to the fund’s, continue to languish with wide discounts. The £11.3 billion Scottish Mortgage Investment Trust announced a share-buyback program of up to £1billion over the next 2 years to try and close the discount. Since then, the discount has been reduced to 9 percent. Baillie Gifford is the trust’s asset manager. It has about a quarter in private companies, including SpaceX.
Charlotte Cuthbertson said Destiny’s premium of close to 500 percent was “crazy”. In 2021, the private market became incredibly frenetic. Once interest rates began to rise, investors became very nervous. Many people got their fingers burned.
The UK market is much more skeptical than the US. The market has shunned many great trusts that provide exposure to the same companies for much lower prices.
Recent interest rate increases have raised concerns about the accuracy and frequency of British investment trusts’ valuations. Chrysalis Investments is a £476million investment trust that specializes in private businesses. It trades at a discount of 44 percent. The Schiehallion Fund is also controlled by Baillie Gifford and trades at a discount of 44 percent. SpaceX, Wise, and ByteDance (the TikTok owner) are among its top holdings.
Portfolios are valued monthly for the Destiny Tech100 Fund. Ark, an investment firm led by Cathie wood, has attacked Destiny, saying that it “might seem too good to be real”. It claimed that Destiny’s shares could fluctuate “wildly”, above or below their net asset value. Ark funds are structured so that they trade on the asset values of companies within the portfolio.
Prasad explained that the high liquidity of Destiny’s shares meant that investors could withdraw their money quickly, unlike with more complex funds. He tweeted, “We think liquidity is the most important factor.” He tweeted: “We believe liquidity matters most.”
Ark launched a range of actively managed exchange traded funds in Europe for the first ever this week. Ark Innovation ETF, also known as ARKK in London, is listed under that ticker.