Image showing what it looks like when one stock creates concentration risk because it makes up too much of a portfolio.
Image showing what it looks like when one stock creates concentration risk because it makes up too much of a portfolio.

Introducing the Cache Exchange Fund: Making tax-deferred diversification broadly accessible

We’re bringing financial products used by the 0.1% to anyone with large stock positions and announcing our $8.5M seed round towards that mission.

Srikanth Narayan

Founder and CEO

What you'll learn

Sometime in the last decade or two, you made a decision that upgraded your financial outlook. Thanks to this decision, whether it was joining or investing in the right company at just the right time, you now hold stock that has grown substantially. This stock makes up more than 10% of your net worth, which financial advisors call a “concentrated portfolio.” You’re faced with a hard choice as you think about securing your long-term wealth. Should you sell to diversify and face a giant tax bill? Or hold and endure increased risk?

For almost a century, a third option has been available for the ultra-wealthy: using an exchange fund to diversify without a significant tax hit. However, this option has remained inaccessible to those outside the top 0.1%.

Today, we’re making that option available to you.

I couldn’t be more excited to announce the launch of the Cache Exchange Fund, a modern exchange fund for any investor with a large stock position.

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An exclusive strategy for almost a century

Since the 1930s, exchange funds have offered a tax-efficient method for diversifying concentrated stock portfolios. However, even today, only a small number of traditional investment firms make them available to their ultra-wealthy clients.

Meanwhile, stocks have become a cornerstone of tech compensation packages, fortuitously at a time when these companies were also experiencing massive growth. The Magnificent Seven (Apple, Microsoft, Amazon, Alphabet, Meta, Nvidia, and Tesla) represents almost 25% of the value of the total US Stock Market today, up from just about 2.5% twenty years ago. These extraordinary returns have only made their shareholders’ portfolios more concentrated. Across our client base, it’s common to hear that 25% to 95% of their net worth is tied up in one or two stocks.

Tech employees aren’t the only ones holding concentrated stock positions. S&P 500 companies spend $250B+ every year on stock-based compensation. According to industry estimates, investors hold over $6 trillion in highly-appreciated, concentrated stock positions.

Concentration can be a double-edged sword. Stocks like Nvidia, Apple, and Tesla have risen by more than 1000% over the last decade, creating massive wealth. On the other hand, significant downturns — like the one in 2022, which pummeled recent IPOs by 90% — can turn concentrated portfolios into ticking time bombs.

Diversification is one way to control that risk. But today, you have to sell to diversify, and that can be a tough pill to swallow when you’re facing a giant tax bill.

Finally, an exchange fund built for you

I started Cache two years ago after having the fortune to experience this concentration problem firsthand while at Uber. I knew I had to diversify, and I was incurring massive tax bills to do so. Only later did I learn about sophisticated strategies used by the ultra-wealthy to manage large stock positions. Most of my friends and colleagues with concentrated portfolios had never heard of exchange funds either — and many of us didn’t have access to them anyway.

That’s why we started Cache: to make the financial products used by the 0.1% available to anyone with large stock positions. The Cache Exchange Fund helps a broader set of investors transform their winning stocks into enduring wealth.

Time out

How do Exchange Funds work?

An exchange fund pools investors with concentrated stocks into a communal fund. Contribution to a properly structured exchange fund is not considered a taxable event. Investors are carefully chosen to create a diversified fund benchmarked to an index (Cache Exchange Fund is benchmarked to the Nasdaq-100). After seven years, you can withdraw a diversified basket of stocks — and defer capital gains taxes until you choose to sell.

(For more information, read our Exchange Fund 101 or our in-depth guide).

Compared to funds from traditional Wall Street banks, the Cache Exchange Fund has lower minimums ($100,000 vs. $1 million), broader eligibility (all accredited investors, not just qualified purchasers), and lower fees (no sales fee, lower management fee). We’ve also built the first exchange fund benchmarked to the Nasdaq-100 index, providing growth exposure to your portfolio. Our automated platform assists with the onboarding timeline and takes just minutes to complete.

A few important disclosures to note: Exchange funds are a passive investment vehicle designed to provide diversified exposure. They do not guarantee higher returns than their underlying stocks, and they are likely to fluctuate with market conditions. While exchange funds may be benchmarked to an index, it should also be noted that fund managers have limited ability to sell stock positions and rebalance the fund. Diversification reduces concentration risk, but it does not eliminate investment risk completely. It is still possible to lose principal when you participate in an exchange fund.

More ways to make the most of your stocks

In addition to the Cache Exchange Fund, we also offer two other products to help investors make the most of large stock positions:

With an industry-leading 60% payout, you can earn passive income on the stocks you choose to hold. Cache makes it extremely simple while providing full control.

Access up to 90% liquidity on your stocks for life’s big purchases, all without a risky line-of-credit on your stock. Establish downside protection while maintaining upside participation.

Let's work together

We opened up limited access to Cache six months ago, and the response has been incredible.

Our first exchange fund already includes stocks from 50+ companies and an average commitment of almost $650,000. We’re working through a waitlist of over 1,000 people, with reservations totaling over $900M across 150 companies. We’ve partnered with highly respected wealth management firms like Adero Partners, Citrine Capital, Fort Point Capital, Three Bell Capital, and more to offer the Cache Exchange Fund to their clients.

We achieved this thanks to an incredibly interdisciplinary team with technology experience from places like Uber, Meta, and Alphabet and investing backgrounds from Goldman Sachs, Eaton Vance, and Russell. We’re also excited to share that we’ve raised $8.5M in seed funding co-led by First Round Capital and Quiet Capital, with support from notable angels across Silicon Valley and Wall Street, including Adam Nash, Ajeet Singh, Gokul Rajaram, James Herbert, Martin Mao, and Ralph Drybrough.

Lastly, thanks to the visionary early adopters who’ve helped us get this far. We understand the trust you’ve placed in us, and we work hard to earn it every day.

Whether you're a tech employee, an investor, or someone with a large portion of your wealth in specific stocks, Cache is here to help make the most of your large stock positions.

Is the Cache Exchange Fund a fit for you? Try out our calculator to understand the benefits and see if you are a match by telling us about your stocks.

<p class="blog_disclosures-text">Exchange Funds, Stock Lending and Collar Advance products are offered through Cache Securities LLC, an SEC-registered broker-dealer and Member of FINRA. Securities products offered by Cache Securities are available only to residents of the United States in jurisdictions where Cache is registered as a broker dealer.</p>

<p class="blog_disclosures-text">Material presented in this article is gathered from sources that we believe to be reliable. We do not guarantee the accuracy of the information it contains. This article may not be a complete discussion of all material facts, and it is not intended to be the primary basis for your investment decisions. All content is for general informational purposes only and does not take into account your individual circumstances, your financial situation, or your specific needs, nor does it present a personalized recommendation to you. It is not intended to provide legal, accounting, tax or investment advice. Investing involves risk, including the loss of principal.</p>


Diversify your stocks without a giant tax bill
Over $100k in a single stock?
The Cache Exchange Fund can help.
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