Exchange Funds
Holding on to highly appreciated stocks in your portfolio?
Cache lets you exchange your stock for a diversified fund without triggering taxes. It's a technique used by the ultra-wealthy, now available for you.
A diversified fund created by pooling investors with concentrated stock positions. Investors contribute stocks in specific ratios to mimic an index fund, and each investor receives fund shares in exchange for their stocks. Qualifying assets (e.g. real estate) are held in the fund to maintain an exchange fund status.
Keep more of your money
Keep more of your money
With an exchange fund, you get a tax-deferred diversified portfolio in 7 years. Here's how the timeline compares with other tax-advantaged instruments.
Exchange Funds
7YRS
Charitable Trusts
20yrs
IRA
30 – 40yrs
401K
30 – 40yrs
Contributions and redemptions aren’t taxable events under the current IRS code (IRC 721). The money you would have paid in taxes stays invested and compounds over time.
Keep more of your money
Exchange funds offer benefits beyond diversification. The amount you would have paid in taxes remains invested in the market, allowing for tax-deferred growth in your portfolio. Further, they offer estate planning benefits such as reduced tax obligations for heirs.
With an exchange fund, you get a tax-deferred diversified portfolio in 7 years. Here's how the timeline compares with other tax-advantaged instruments.
Exchange Funds
7YRS
Charitable Trusts
20yrs
IRA
30 – 40yrs
401K
30 – 40yrs
Minimize your risk
Minimize your risk
Most stocks don’t outperform a broader index over a long time horizon, and just a handful see higher risk-adjusted returns.
NASDAQ-100 performance, 2002–2022
Diversified portfolios have far lower business risk and perform better across measures like volatility, beta, and drawdown.
Minimize your risk
Most stocks don’t outperform a broader index over a long time horizon, and just a handful see higher risk-adjusted returns.
NASDAQ-100 vs Individual Stocks, 2002–2022
Invest in quality portfolios
Invest in quality portfolios
Over the last 30+ years, the NASDAQ-100 has grown at an annual rate of 14.74%, outperforming the S&P 500.
1 year
-24.72%
5 years
13.95%
10 years
15.91%
30 years
14.74%
Our first exchange fund aims to provide an exposure similar to the NASDAQ-100, an index comprised of flourishing companies across modern industries.
Nasdaq-100 Performance (Avg Annual Return)
Over the last 30+ years, the NASDAQ-100 has grown at an annual rate of 14.74%, outperforming the S&P 500.
1 year
14.70%
5 years
13.95%
10 years
15.91%
30 years
14.74%
If you want to diversify $300k in stock, selling it could mean a $100k tax bill. Doing it through an exchange fund defers tax liabilities, creating significant growth over time.
40.8%
How redemption works
Exchange fund redemptions aren’t taxable events. At redemption, we’ll distribute a optimized basket of stocks to each investor, maximizing diversification and tax-loss harvesting. We’ll also match their ownership percentage and cost basis. Investors will need to meet the 7-year investment timeframe to receive a diversified portfolio.
A redeemed portfolio can continue to grow on a tax-deferred basis, or continue to grow in an exchange fund. Heirs can inherit the diversified portfolio at a stepped-up cost basis.
additional gain with an exchange fund.
How does redemption affect my gains?
How redemption works
Exchange fund redemptions is not the same as selling stocks. At redemption, investors receive an optimized basket of stocks that matches their ownership percentage and cost basis. Investors will need to meet the 7-year investment timeframe to receive a diversified portfolio. The distribution is not a taxable event as investors continue to own their stocks.
A redeemed portfolio can continue to grow on a tax-deferred basis, or continue to grow in an exchange fund. Heirs can inherit the diversified portfolio at a stepped-up cost basis.
Simulated results for illustrative purposes only. Assumes a tax status of married filing jointly in CA with a combined annual income of $600,000+. Effective capital gains tax rate: 34.75%. Initial cost basis: $50,000. Expected annual portfolio return: 10%. Investment Term: 7 years. The expected annual portfolio return of 10% is hypothetical, gross of fees, and used to illustrate the benefits of potential tax deferral.
$100k minimum investment
All accredited investors
0.4% – 0.8% fee based on contribution
Let’s say you want to diversify $300K in stock. Doing it through an exchange fund defers tax liabilities, creating significant growth over time.
40.8%
How redemption works
Exchange fund redemptions aren’t taxable events. At redemption, we’ll distribute a optimized basket of stocks to each investor, maximizing diversification and tax-loss harvesting. We’ll also match their ownership percentage and cost basis. Investors will need to meet the 7-year investment timeframe to receive a diversified portfolio.
A redeemed portfolio can continue to grow on a tax-deferred basis, or continue to grow in an exchange fund. Heirs can inherit the diversified portfolio at a stepped-up cost basis.
additional gain with the Cache Exchange Fund.
How redemption works
Exchange fund redemptions aren’t taxable events. At redemption, we’ll distribute a optimized basket of stocks to each investor, maximizing diversification and tax-loss harvesting. We’ll also match their ownership percentage and cost basis. Investors will need to meet the 7-year investment timeframe to receive a diversified portfolio.
A redeemed portfolio can continue to grow on a tax-deferred basis, or continue to grow in an exchange fund. Heirs can inherit the diversified portfolio at a stepped-up cost basis.
Cache Exchange Fund
Cache Exchange Fund
If you sell & invest
If you sell & invest
TAX DRAG
-$86,875
*Simulated results for illustrative purposes only. Assumes a tax status of married filing jointly in CA with combined annual income of $600,000+. Effective capital gains tax rate: 34.75%. Initial cost basis: $50,000. Target growth rate: 10%.
Enroll
Tell us about your concentrated stock holdings and cost basis. It only takes a few minutes. We will make sure you are eligible and match you to the right pool.
Contribute
We’ll notify you when there’s a match for a Cache Exchange Fund. Our simple and precise stock transfer experience will help you transfer over the right stocks from your current brokerage.
Exchange
You’ll receive shares that represent your contribution to the fund. Watch your investments compound tax-deferred, and redeem in seven years for a diversified portfolio.
According to SEC filings, executives and board members at major public companies have regularly utilized exchange funds.
Cache makes the powerful, tax-efficient diversification of exchange funds widely accessible and easy to use for anyone with a concentrated stock position. From employees to venture capitalists, everyone can benefit.
Bill Trenchard
PARTNER, FIRST ROUND CAPITAL AND CACHE INVESTOR
Exchange funds have certainly benefited myself and my family by allowing us to diversify our concentrated holdings and reduce risk. Given their long-term investment focus, exchange funds are an excellent shareholder for the company I am pouring my energy into.
Scott Dietzen
FORMEr CEO and CHAIRMAN, PURE STORAGE ($PSTG)
Minimum investment
$100k
Eligibility requirements
Accredited Investors
$200k+
income for the last 2 years OR
$300k+
with spouse OR
$1M+
net worth excluding primary residence
Fees
0.4% – 0.8% management fee
(based on contribution)
Zero sales fee or performance fee.
Available directly through Cache.
Wholesale discounts through your advisor.
Minimum holding period
2 years
Holding period for tax advantages (required by the tax code)
7 years
What if I want to redeem earlier?
Before two years, you won’t be able to redeem. We institute a two-year lockup to encourage long-term investors to participate. Each pool is carefully weighted to achieve certain investment goals, and redemptions hurt your fellow investors.
After two years but before seven years, redemption requests are satisfied by distributing your original contribution back to you at a rate that is the lower of the contributed stock value or the fund’s net asset value. The rest is retained until term commitments are met. Note that early redemptions incur a penalty fee. Please refer to the fund documents for a full set of redemption terms.
After seven years, you can redeem a diversified portfolio on a tax-deferred basis.
What if I want to redeem earlier?
What if I want to redeem earlier?
Before two years, you won’t be able to redeem. We institute a two-year lockup to encourage long-term investors to participate. Each pool is carefully weighted to achieve certain investment goals, and redemptions hurt your fellow investors.
After two years but before seven years, redemption requests are satisfied by distributing your original contribution back to you at a rate that is the lower of the contributed stock value or the fund’s net asset value. The rest is retained until term commitments are met. Note that early redemptions incur a penalty fee. Please refer to the fund documents for a full set of redemption terms.
After seven years, you can redeem a diversified portfolio on a tax-deferred basis.
Minimum investment
$500k – $1M
Eligibility requirements
Qualified Purchasers
$5M+
in investments
Fees
1.5% – 2.25% overall annual fee
1.50%+
sales fee
0.85%+
management fee
0.75%+
wealth manager fee
Available for private wealth clients only
Variable performance fee
Minimum holding period
3 years
Holding period for tax advantages (required by the tax code)
7 years
Other Exchange Fund Providers
(Large Wall St Investment Banks)
Minimum investment
$100k
$500k – $1M
Eligibility requirements
Accredited Investors
$200k+
income for the last 2 years OR
$300k+
with spouse OR
$1M+
net worth excluding primary residence
Qualified Purchasers
$5M+
in investments
Fees
0.4% – 0.8% management fee
(based on contribution)
Zero sales fee or performance fee.
Available directly through Cache.
Wholesale discounts through your advisor.
1.5% – 2.25% overall annual fee
1.50%+
sales fee
0.85%+
management fee
0.75%+
wealth manager fee
Available for private wealth clients only
Variable performance fee
Minimum holding period
2 years
3 years
Holding period for tax advantages (required by the tax code)
7 years
What if I want to redeem earlier?
Before two years, you won’t be able to redeem. We institute a two-year lockup to encourage long-term investors to participate. Each pool is carefully weighted to achieve certain investment goals, and redemptions hurt your fellow investors.
After two years but before seven years, redemption requests are satisfied by distributing your original contribution back to you at a rate that is the lower of the contributed stock value or the fund’s net asset value. The rest is retained until term commitments are met. Note that early redemptions incur a penalty fee. Please refer to the fund documents for a full set of redemption terms.
After seven years, you can redeem a diversified portfolio on a tax-deferred basis.
What if I want to redeem earlier?
What if I want to redeem earlier?
Before two years, you won’t be able to redeem. We institute a two-year lockup to encourage long-term investors to participate. Each pool is carefully weighted to achieve certain investment goals, and redemptions hurt your fellow investors.
After two years but before seven years, redemption requests are satisfied by distributing your original contribution back to you at a rate that is the lower of the contributed stock value at the time of redemption or the value of your fund shares based on the fund’s net asset value.. The rest is retained until term commitments are met. Note that early redemptions incur a penalty fee. Please refer to the fund documents for a full set of redemption terms.
After seven years, you can redeem a diversified portfolio on a tax-deferred basis.
7 years
The data for the key terms of other exchange fund providers are sourced from certain large institutional providers of exchange funds which Cache believes to be relevant competitors for its own exchange fund. However, key terms are not meant to be representative of any particular competitor or other provider of exchange funds. Cache makes no representation as to the accuracy of this information nor does Cache create an implication that such data has been updated as of any particular time from when such data was originally sourced.
How does the Cache exchange fund work?
Is an exchange fund right for me?
Why should I choose Cache?
What’s next if I choose to participate?
The Cache Exchange Fund (“Fund”) discussed herein has not commenced operations yet. The purpose of this material is to inform, and it should not be considered an offer, solicitation of an offer, or advice to buy or sell securities or investment products.
The investments mentioned may not be suitable for all clients. All investments involve risk. Before making an investment decision, each investor should carefully consider the risks associated with the investment, and make a determination, based upon their own particular circumstances, that the investment is within their investment objectives and risk tolerance. Keep in mind that while diversification may help spread risk, it does not assure a profit or protect against loss in a down market. There is always the potential of losing money when you invest in securities or other financial products. The rate of return on investments can vary widely over time, especially for long-term investments. Investment losses are possible, including the potential loss of all amounts invested, including principal. For detailed overview of risks, please visit the document here.
The Cache Exchange Fund is an alternative investment. Regulations require certain eligibility criteria for participation. Exchange funds are suitable only for eligible, long-term investors who are willing to forego liquidity and put capital at risk for substantial periods of time. Regulations require a minimum holding period to realize the potential advantages. They may also have higher fees than traditional investments. Tax counsel for Cache is of the opinion that investors who contribute appreciated stocks to the fund will not incur federal income tax liability. Tax laws might change. Clients should consult their own tax and legal advisors.
Any products discussed herein may be purchased only after a client has carefully reviewed the official offering materials associated with each product. Cache makes no representations or warranties with respect to the accuracy of the information contained in this overview and expressly disclaims any and all liability relating or resulting from the recipient’s use of this presentation.Forward looking statements contained in these materials are based on a variety of estimates and assumptions by Cache. There can be no assurance that any such estimates and assumptions will prove accurate, and actual results may differ materially, including the possibility that an investor may lose some or all of any invested capital. Neither Cache nor any of its representatives has made or makes any representation to any person regarding any forward looking statements.
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