After seven years, redemptions from the Cache Exchange Fund are structured to provide investors with a high degree of flexibility and continued tax efficiency. Here’s a detailed look at how the process works:
Redemption Request: Once you've reached the seven-year threshold, you may submit a request to redeem your shares in the fund. This can be done at your discretion, as there is no mandatory redemption point, even after seven years. The fund will continue to exist as long as there are investors remaining in the fund.
Distribution of a Diversified Basket of Securities: Instead of cash, you will receive a diversified basket of securities that represents your pro-rata share of the fund's holdings. A representative sample of 20-25 stocks are chosen, such that it mirrors the diversification and risk profile of the fund's overall portfolio. This basket will likely exclude any specific stock you originally contributed to minimize your exposure to that particular risk again. You can also specify other stocks to include or exclude, and we’ll do our best to honor these requests.
Tax Considerations: The redemption process is designed to be tax-efficient. Since it is an in-kind redemption, no taxable events are triggered. The distributed basket of securities you receive will have the same aggregate cost basis as the original shares you contributed. Taxes would only be incurred when you decide to sell any of the securities you received from the redemption.
Flexibility in Redemption: You can choose to redeem all or part of your fund shares, providing flexibility based on your financial goals and needs. This allows you to gradually exit the investment if you prefer, rather than all at once.
Continued Investment Option: If you prefer not to redeem your shares, you can choose to remain invested in the fund. The fund will continue to operate beyond the seven-year mark, allowing you to benefit from tax-deferred diversification and continued management.
Post-Redemption Strategy: After receiving your basket of securities, you can decide how to manage these assets based on your individual investment strategy and tax planning needs. This might involve selling certain stocks in a staggered manner to manage potential tax impacts effectively.
This redemption process is carefully designed to meet the needs of long-term investors, providing an exit strategy that aligns with the fund's overarching goals of diversification and tax efficiency.
To better understand other exchange fund mechanics, see our detailed guide.