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, S&P 500, and S&P 500 Growth indices, 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.
Breakdown of Cache Funds
Nasdaq-100 Exchange Fund
Focus: Growth-oriented portfolio with heavy exposure to the technology sector.
Objective: Engineered for precise tracking to the Nasdaq-100 index.
Key Features: Ideal for investors seeking concentrated growth potential in technology and other innovation-led industries.
S&P 500 Exchange Fund
Focus: Broad market exposure across 500 large-cap U.S. companies.
Objective: Provides a diversified sector mix to cover the overall market performance.
Key Features: Suitable for investors looking for balanced exposure to multiple sectors without heavy concentration.
S&P 500 Growth Exchange Fund
Focus: Growth subset of the S&P 500, with a tilt toward technology and consumer discretionary sectors.
Objective: Mirrors the performance of growth-focused companies within the S&P 500 index.
Key Features: Designed for investors targeting growth opportunities while still benefiting from S&P 500 exposure.
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 addition, Cache employs a fund-matching process to determine eligibility for participation. Each investor's contributed shares are evaluated for their compatibility with the fund's structure and criteria. For example, investors aiming to contribute shares to the Nasdaq-100 fund must meet certain accreditation standards and align their contributions with the fund’s sector focus.
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.
Tips for Selecting the Right Exchange Fund
Assess Your Investment Goals: Determine whether you’re seeking broad market exposure, growth-focused investments, or concentrated sector performance.
Evaluate Your Current Portfolio: Look for a fund that complements your existing investments and enhances diversification.
Understand Sector Exposures: Consider how exposure to technology, consumer discretionary, or other sectors aligns with your financial strategy.
Review Eligibility: Ensure your contributed shares match the requirements of the fund during the matching process.
For additional information, see: