The Cache Exchange Fund is an investment vehicle that allows investors to diversify their portfolio while deferring capital gains taxes that would otherwise arise from selling appreciated stock positions. Most exchange funds are specifically designed to allow investors to pool their individual stocks into a diversified fund, thus mitigating the risks associated with holding a concentrated stock position.
Diversification and Benchmarking
Cache currently offers exchange funds benchmarked to the Nasdaq-100 index, providing similar return and risk characteristics as the underlying index. However, exchange funds do not attempt to replicate the index stock for stock, as they are formed through contributions from shareholders and not from a market purchase of stocks.
Fund Management
Our funds are primarily passively managed, meaning fund managers do not frequently buy and sell assets. However, we may implement some active management decisions in response to dividends and other corporate actions, in order to align the fund more closely with its investment objectives. These activities are carried out with the aim of maintaining or achieving desired exposure to market sectors or responding to market conditions.
Qualifying Assets
Investor contributions form the fund's primary assets. However, tax regulations also require at least 20% of an exchange fund to be dedicated to illiquid “qualifying assets.” We achieve this purpose by investing in real estate funds. The real estate portion is managed through partnerships with experienced external managers and funded through credit facilities, which are part of the fund's strategic financial management.
Enrollment Windows (and Rebalancing)
Our funds are structured to offer periodic enrollment windows that allow new investors to join. This approach provides flexibility and helps our managers ensure that our funds meet their diversified investment objectives. Our open window approach could be used to rebalance the fund when it becomes unbalanced because some assets outperform others.
In managing our funds, we strictly adhere to all regulatory standards and our own commitment to transparency, acting as a steward of investor capital under strict compliance and oversight. Nonetheless, exchange funds are for long-term investors, and like all investments they may carry risks, including the loss of principal.
For additional information, see: