Exchange Fund

Diversify without a giant tax bill

Holding on to highly appreciated stocks in your portfolio?

Exchange your stock for a diversified fund without triggering taxes. It's a technique used by the ultra-wealthy, now available for you.

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Get Started
SEC registered
Secure & private
$MSFT

What’s an exchange fund?

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.

$AAPL
$AAPL
10%
$GOOG
$GOOG
8%
$CSCO
$CSCO
7%
$AVGO
$AVGO
7%
$AMZN
$AMZN
8%
MSFT
MSFT
10%
$TSLA
$TSLA
7%
$META
$META
7%
$NVDA
$NVDA
7%
$NFLX
$NFLX
4%
$ADBE
$ADBE
4%
$INTC
$INTC
4%
$v
$V
4%
$qcom
$qcom
4%
$intu
$intu
4%
$ebay
$ebay
4%
$pypl
$pypl
2%
$crm
$crm
2%
$uber
$uber
1%
$ABNB
$ABNB
1
$snap
$snap
1%
$SNOW
$SNOW
1%
$VEEV
$VEEV
1%
$BKNG
$BKNG
1%
$WDAY
$WDAY
1%
Cache ExchanGe fund

A Cache Exchange Fund lets you

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

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 vs Individual Stocks, 2002–2022

5-year window
80% of stocks underperformed
7-year window
85% of stocks underperformed

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

5-year window
80% of stocks underperformed
7-year window
85% of stocks underperformed

Invest in quality portfolios

Our first exchange fund aims to provide an exposure similar to the NASDAQ-100, an index comprised of flourishing companies across modern industries.

See the difference

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%

potential incremental pre-tax gain with an exchange fund.

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

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.

Try our simulator

Exchange Fund

$300,000
$584,615
Capital gain: $284,615
INITIAL INVESTMENT: $300,000

If you sell & invest

$300,000
$213,125
$415,320
Capital gain: $202,195
TAX DRAG -$86,875
INITIAL INVESTMENT: $300,000
INITIAL INVESTMENT: $213,125
StartING Point
At investment
AFTER 7 YEARS

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.

Making exchange funds more accessible

  • $100k minimum investment

    Others: $500K – $1M

  • All accredited investors

    Others: Qualified Purchasers only ($5M+ in Investments)

  • 0.4% – 0.8% fee based on contribution

    (wholesale discounts through your financial advisor)

    Others: Higher fees + sales fees + performance fees

How it works

Icon – Reverse

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.

Icon – Contribute

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.

Icon – Redeem

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.

Trusted by leaders in tech

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)

Compare exchange fund providers

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% fee based on contribution

$100K+

0.8%

$250K+

0.65%

$500K+

0.6%

$1M+

0.5%

$5M+

0.4%

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

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 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.

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

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% 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 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.

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.

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

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

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.

Learn

Common questions

  • The basics

    How does the Cache exchange fund work?

  • Eligibility

    Is an exchange fund right for me?

  • BEnefits

    Why should I choose Cache?

  • Getting started

    What’s next if I choose to participate?

  • What's the main benefit of participating in a Cache Exchange Fund?

  • What are the investment goals of this fund?

  • Is there a taxable event after seven years? What will I receive, and what are the redemption fees?

  • What do you mean when you say your fund “approximates the Nasdaq 100”?

  • What happens when the stock I contribute to the fund goes up or down?

  • How are dividends and other income treated?

  • What tax considerations may come up while I’m in the fund? Is there an annual K-1?

  • Who can participate in the Cache Exchange Fund – and which stocks are accepted?

  • How is an Exchange Fund different from an ETF?

  • What if I don’t meet the minimum investment amount?

  • May I contribute stock for a company I work at? Can I contribute unvested equity?

  • What happens to my cost basis over the course of the fund?

  • How does the real estate investment work? What happens to it after seven years?

  • Do you rebalance the fund quarterly, like the actual Nasdaq 100?

  • How are investors protected if Cache is no longer viable?

  • Is the Cache Exchange Fund designed to improve my returns?

  • How does a Cache Exchange Fund compare to products from other providers?

  • How does the Exchange Fund help me avoid tax drag?

  • How does the Exchange Fund reduce my concentration risk?

  • How does Cache determine and charge fees?

  • How does the seven-year holding requirement compare to other providers?

  • Do you offer multiple funds, or is it one fund with different enrollment windows?

  • How does the reservation and formation process work?

  • How do you determine who gets an allocation and how big each fund is?

  • What happens when the fund closes?

  • Why do you institute a two-year lockup?

  • How do redemptions work before the seven-year mark? Are there any fees?

  • How do redemptions work once the fund “matures” after seven years? Are there any fees?

  • Can I transfer my shares in the fund shares or borrow against them? What are the details?

QUESTION

QUESTION

01/04

What's the main benefit of participating in a Cache Exchange Fund?

The main benefit is tax-advantaged diversification. Overexposure to a single company stock means higher risk, more volatility, and statistically less growth.

The probability of any stock outperforming the market is low. In 2022, for example, only 12% of stocks in the Nasdaq-100 index meaningfully outperformed the index, and only 1% outperformed the index by more than 50%.

Over a longer timespan, index funds have produced higher risk-adjusted returns than all but a handful of stocks. The average equity investor underperformed the S&P 500 by 4.32% over the 20-year period from 1992–2011. Based on Cache’s internal research, since 2002, over 80% of Nasdaq-100 stocks underperformed the index over a 5-year period, and 85% underperformed over a 7-year period.

With Cache as your exchange fund provider, you’ll exchange your equity for a diverse set of investments without triggering taxes. This tax deferral ensures that the full value of your stock stays invested in the market, compounding over time. Assuming historic stock returns, this could add to a sizable advantage over time.

What are the investment goals of this fund?

With our exchange funds, our goal is to help you diversify your large stock positions into a fund that approximates the performance of the broader index – specifically, the Nasdaq-100 Index.

While many tech stocks loosely track the performance of the Nasdaq-100, its performance over time has surpassed most of the individual stocks it contains. As an index fund, it also tends to have less volatility than its constituent stocks while maintaining a similar upside profile.

Is there a taxable event after seven years? What will I receive, and what are the redemption fees?

At the end of the seven-year maturation period, you’ll be able to choose between remaining in the fund or withdrawing a diversified basket of stocks that matches your pro rata share. Cache does not charge any redemption fees after the seven-year maturation period.

There isn’t a “sale” that triggers a taxable event upon redemption from an exchange fund. You’ll receive a basket of stocks that you can continue to hold or choose to sell.

If you do decide to sell shares you’ve withdrawn from the fund after the seven-year window, the cost basis of those shares will be equal to the cost basis of the stock you originally contributed to the fund.

What do you mean when you say your fund “approximates the Nasdaq 100”?

With every fund, we evaluate the incoming requests and carefully weigh them to quantitatively approximate the characteristics of the Nasdaq-100. We do not aim to replicate the index, and any fund might have underlying holdings that are different from the Nasdaq-100. That being said, we anticipate the largest holdings in the exchange fund be those in the Nasdaq-100 Index (e.g., AAPL, MSFT, NVDA, GOOGL, etc.) Before you commit to participating in the fund, you’ll receive detailed information about the matched portfolio for the fund.

Current tax rules also require us to commit 20% of the investments in the fund to illiquid assets – usually satisfied with a real estate asset. When all the pieces come together, we want the fund to provide a diversified investment portfolio that reduces your risk while providing growth characteristics similar to the Nasdaq-100.

What happens when the stock I contribute to the fund goes up or down?

When you participate in the fund, your ownership of a specific stock is exchanged for an equivalent share in the fund. Your ownership share is locked in when the fund is formed.

While the movements of individual stocks influence the value of the fund, each investor’s outcome is driven by the performance of the diversified portfolio in the fund – not the stock you initially contributed.

How are dividends and other income treated?

Income generated from dividends (or from real estate) will primarily be used to meet the investment objectives and expenses of the fund. At the fund manager’s discretion, any excess income would be distributed to fund participants.

What tax considerations may come up while I’m in the fund? Is there an annual K-1?

The exchange fund investment is a private investment that issues a Schedule K-1 annually. As the exchange fund generally avoids a sale of contributed stocks, only minor tax issues should be expected.

Who can participate in the Cache Exchange Fund – and which stocks are accepted?

As a sophisticated investment with a long-term outlook, the Cache Exchange fund is only open to some investors.

Tell us about your situation, and we’d be happy to explain your options. Three factors drive your ability to participate in the Exchange Fund:

1) Eligibility:

Are you an “accredited investor”? Under Regulation D of the Securities Act, investments like Exchange Funds are only available to investors who:

  • Earned more than $200,000 each of the last two years
  • Earned more than $300,000 as a couple
  • Or have a net worth of over $1,000,000, excluding their primary residence.

If you meet any of those criteria, you typically meet the basic requirement for eligibility. Most other exchange fund providers require investors to meet the higher threshold of being a “qualified purchaser” with over $5 million in investments. Note that certain trusts and LLCs are also eligible to participate.

2) Minimum contribution:

We typically require a minimum investment of $100,000 (which can be spread over multiple stocks if needed). You are invited to reserve a spot in the fund even if your intended contribution falls below that threshold: we may waive the minimum on a case-by-case basis for select stocks that help with overall investment objectives.

3) Allocation:

Will your stock help our fund meet investment objectives? In each Exchange Fund we launch, our matching process carefully selects and weighs stocks to create a diversified portfolio toward a particular investment objective – like approximating the Nasdaq-100 index. To achieve that balance, we can only take certain amounts of different stocks in each fund.

If we are unable to offer you an allocation in one fund, we’ll consider your interest for a future fund automatically.

How is an Exchange Fund different from an ETF?

An ETF ("exchange-traded fund") is a fund that can be bought and sold on public exchanges. They typically hold a pool of stocks and/or bonds towards a particular investment objective. You can buy ETFs with your money at most brokerages.

An exchange fund is a tax-efficient private fund owned by investors who exchange their individual stock for shares in the fund. Exchange funds only accept “in-kind” stock contributions, not cash. Also, shares in the fund cannot be bought or sold on public exchanges.

The understandable confusion between “exchange fund” and “ETF” is caused by the two very different definitions of “exchange” in their respective names.

We've rethought exchange funds from the ground up, turning a mostly manually run operation into a highly precise and automated solution that’s accessible to a much larger audience.

What if I don’t meet the minimum investment amount?

Even if you don’t meet the minimum, you can reserve a spot. Our team will be able to waive the minimum on a case-by-case basis for select stocks that help with overall investment objectives.

May I contribute stock for a company I work at? Can I contribute unvested equity?

You can probably contribute fully vested stock in your company, but it depends on your company’s policy and your position in the company. If you’re not sure, that’s okay. Tell us about your situation, and we’ll help you figure out if you’re eligible to participate before you contribute. Many large firms like Apple, Nvidia, Microsoft, Meta, Tesla, and Amazon have friendly policies.

Generally, we encourage companies to follow the standards set by Apple. In their 2022 Proxy Statement, they include, "We allow for certain portfolio diversification transactions, such as investments in exchange funds."

While we can often accept stock from your current company, we can only accept fully vested shares. Exchange funds are a good fit for long-term investors with taxable gains on their holdings.

What happens to my cost basis over the course of the fund?

The Exchange Fund swaps your stock shares for a pro-rata share of the fund. Because there is no “sale,” your cost basis from the stock is transferred to your share in the fund.

After the seven-year maturation window, you’ll be able to withdraw a diversified basket of stocks from the fund. The cost basis of those shares will be cumulatively equal to the cost basis of the stock you originally contributed. The original cost basis is spread across the entire basket of stocks based on a method required by the tax code.

The cost basis may increase if our fund managers are able to tax-loss harvest or implement other tax management strategies during the lifespan of the fund.

When you redeem your shares from the fund, we transmit the adjusted cost basis of the diversified basket to your brokerage account at Cache. If you move your shares from Cache to another brokerage, we should be able to report the cost basis data through the Cost Basis Reporting System.

How does the real estate investment work? What happens to it after seven years?

Per current tax rules, 20% of the fund must be invested in illiquid qualifying assets for the transfer of stock to be treated as a non-taxable event. Most exchange funds satisfy this requirement through real estate investments.

With the Cache Exchange Fund, we work with the best-in-class institutional real estate investment firms in the country to secure an allocation with funds that invest in Core Diversified Real Estate (stable, income-generating, high-quality properties like multi-family apartments, industrials, self-storage, data centers, and more). We do not invest in REITs and other real estate investments that might involve higher leverage strategies.

At the end of seven years, any appreciation in the real estate properties would be captured in the appreciation of your fund share value. While we do not distribute any real estate shares, the real estate participation will be distributed through cash or other securities.

Do you rebalance the fund quarterly, like the actual Nasdaq 100?

As the fund seeks to avoid sales of contributed stocks, the rebalancing efforts are limited to other portfolio management techniques that help achieve the investment objective. The fund managers might elect to rebalance through direct or synthetic exposure gained through additional contributions or purchases.

Cash that’s organically generated within the portfolio — through dividends, corporate events, etc. – may be used to help rebalance the portfolio. Fund managers may allow additional investors to contribute securities to the fund, so long as such contributions are additive to the fund achieving its investment objective.

How are investors and their investments protected if Cache is no longer viable?

Each of our funds is an independent entity owned by its investors, with Cache maintaining little to no ownership in these funds. Each fund is custodied at a global bank (BNY Mellon), and administered by a leading independent fund administrator.

Cache Advisors is an SEC-registered Investment Advisor that advises these funds, and a fully-owned sub-entity of Cache Financials Inc.

In the event that Cache is no longer viable, this setup allows for a smooth transition:
1. Cache Advisors LLC can continue on as a thin entity that fulfills its responsibilities funded solely by the fund revenues.
2. Investors have the right to appoint another manager to carry out the investment advisory duties. Since each fund generates revenue, another capable advisor can step in to assume advisory duties.

Our legal documents provide higher investor protections than customary, and contemplates necessary steps for a transition:

“Anything in this Agreement to the contrary notwithstanding, the Manager may at any time resign if (i) the Manager has designated and admitted to the Fund as a successor Manager any corporation, trust, business trust, limited liability company, partnership or other entity that is wholly owned, directly or indirectly, by Cache (provided that such corporation, trust, business trust, limited liability company, partnership or other entity has, or its personnel have, similar management experience to Cache) and each of the Shareholders, by acquiring Shares of the Fund, hereby consents to the admission of such successor Manager; or (ii) the Manager, with the Consent of the Shareholders, has designated and admitted a substitute Manager; provided that any such succession or substitution shall be effective upon such resignation and shall not in the opinion of tax counsel to the Fund adversely affect the classification of the Fund as a partnership for federal income tax purposes. In the case of the Bankruptcy of the Manager (herein in such event called a “Bankrupt Manager”), those Shareholders holding a majority of the outstanding Shares shall have the right to designate and admit to the Fund a substitute Manager by filing written consents to such action with the records of the Fund.” 

"Shareholders will have the limited right to consent to… (ii) the designation of a substitute manager of the Fund upon the bankruptcy of the Manager or if the Manager resigns as manager and does not designate a Cache affiliate as substitute manager."

 Is the Cache Exchange Fund designed to improve my returns?

Our funds are designed to help you diversify your investments while deferring taxes. They are carefully constructed around a well-known growth index, the Nasdaq-100, which includes many innovative companies, including the so-called magnificent seven (as of Nov 2023). The fund is not an “actively managed” fund with a mandate to perform better than the benchmark index. We generally do not make investment decisions that deviate significantly from the benchmark and approximate well-known benchmarks through quantitative methods.

By swapping a single stock for ownership in a diversified pool of stocks, we help you reduce concentration risk. With an exchange fund, you invest 100% of your principal, which means that your investments compound from a larger base. This could result in significant tax alpha.

All investments have risks, and there is no guarantee of future returns, but there is detailed research that shows diversified investments often outperform individual stocks over time, and that deferring taxes can lead to more growth.

Try our exchange fund simulator to see how different scenarios may play out, or talk to an investment advisor for advice that’s specific to your situation.

How does a Cache Exchange Fund compare to products from other providers?

Cache makes exchange funds easier and more accessible than other providers. Our funds break down the barriers to investing in exchange funds through lower minimums, lower eligibility criteria, and lower fees that are offered direct-to-consumer. We also offer an intuitive and accessible experience that demystifies a previously labyrinthine financial instrument.

How does the Exchange Fund help me avoid tax drag?

When you sell highly appreciated stocks to diversify your holdings, you’ll incur capital gains taxes. Depending on your situation, those taxes can eat up more than 35% of your investment – and it can take years of steady appreciation to get back to where you started.

An Exchange Fund lets you diversify without incurring a tax bill upfront. Every dollar of tax that is deferred is a dollar that's out working for you. Over time, this can compound to a huge advantage even after you pay all the taxes down the line. See examples and illustrations, or try our exchange fund simulator.

How does the Exchange Fund reduce my concentration risk?

Many investment advisors say you’re exposed to concentration risk if more than 10% of your net worth is tied up in a single stock. When you have a concentrated stock position, your portfolio experiences the movement of that stock in an outsized way – and it could expose you to significant financial losses if the stock performs poorly. See research and examples.

Moving to a diversified position via an exchange fund reduces this risk. The Cache Exchange fund approximates the characteristics of the Nasdaq-100 index fund – and it spreads your risk across many stocks in different industries.

How does Cache determine and charge fees?

Our fees are considerably lower than other exchange funds – typically 0.4% to 0.8% of assets under management on an annualized basis. We determine fees based on the gross assets in the fund, and management fees are charged monthly.

There are no sales fees or performance fees. No redemption fees are charged if an investor remains in the fund for at least seven years.

How does the seven-year holding requirement compare to other providers?

The seven-year holding period is based on the current tax code, and it applies to any brokerage that offers an exchange fund.

However, the seven-year requirement is significantly shorter than the timeframe for many alternative tax-advantaged investments. Charitable trust terms require a 20+ year holding period. Depending on your age, an IRA or 401(k) might require up to 40 years before you can withdraw your investment without penalties.

Do you offer multiple funds, or is it one fund with different enrollment windows?

We take reservations from investors on an ongoing basis, and we intend to launch new funds several times per year. We’ll launch new funds each time we’re able to create a diversified pool of stocks that meets our fund managers’ investment objectives.

How does the reservation and formation process work?

The reservation process has three simple steps. Once you register your interest, we’d be happy to connect you with an expert who can explain everything in more detail:

  1. Register your interest and check your eligibility by telling us a little bit about your situation. There’s no commitment, and it takes less than a minute. Register now →
  2. Receive an invitation. When we have enough interest to match your stock with a new fund, we’ll invite you to participate. If you accept your allocation, we’ll collect more information, verify your eligibility, and help you move your stock into a reserve (or escrow) account.
  3. Commit and close. Over the last few days before the fund closes, you’ll sign a subscription agreement that finalizes your commitment to the fund. 

When the fund closes, your stock shares will be swapped for a pro-rata share of the fund. Here’s a more detailed view.

How do you determine who gets an allocation and how big each fund is?

To launch a new fund, our fund managers need to identify investors whose stocks can be pooled to approximate the composition of the Nasdaq-100. Typically, that means making allocations for 40 to 80 stocks and weighting them to mimic the holdings in the fund.

It’s a little like putting together a jigsaw puzzle by solving for various metrics quantitatively. 

Sometimes, we’re unable to make allocations for certain investors because we don’t have enough other stocks to balance out their holdings. Certain stocks might not be additive to the fund performance, and we might not consider them.

What happens when the fund closes?

Once investors have signed off on their contributions, the stocks are pooled in a fund registered as a Delaware Limited Partnership. Our independent third-party fund administrator will set the Net Asset Value for the fund, which helps determine each investor's percentage ownership. Certain qualifying asset investments, such as real estate investments, are made to ensure compliance with the regulatory requirements of an exchange fund.

Fund shares will be issued through our transfer agent and show up on your Cache brokerage account. The fund assets will be held at BNY Mellon, an institution with decades of experience in asset custody.

Why do you institute a two-year lockup?

We institute a two-year lockup on the shares contributed to the fund to discourage short-term investors from participating. The reason: each pool is carefully weighted to achieve certain investment goals, and redemptions hurt your fellow investors. If you have short-term liquidity needs, this investment is not for you.

How do redemptions work before the seven-year mark? Are there any fees?

After two-year lockup period, it is possible to redeem your shares from the fund. However, regulations require a seven-year holding period to gain the full benefits of the exchange fund.

Redemption requests after the lockup but before the seven-year mark 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 2% penalty fee. Please refer to the fund documents for a full set of redemption terms.

How do redemptions work once the fund “matures” after seven years? Are there any fees?

All our Exchange Funds are perpetual-life vehicles, which means they could grow in a tax-deferred manner, even after seven years.

After seven years, however, you may redeem your shares at any time. When you do, we’ll distribute a diversified basket of stocks that matches your ownership percentage and cost basis. We don’t charge any redemption fees.

Can I transfer my shares in the fund shares or borrow against them? What are the details?

Like any private funds, such as hedge funds or VC funds, there are no public exchanges for shares in Exchange Funds. Fund shares will be redeemed by Cache only or through the fund administrator in the event that Cache is no longer operational. Fund shares can be transferred through gifts or inheritances.

If you need to access liquidity against your exchange fund shares, we can arrange for you to borrow against your shares.

Common Questions

What's the main benefit of participating in a Cache Exchange Fund?

The main benefit is tax-advantaged diversification. Overexposure to a single company stock means higher risk, more volatility, and statistically less growth.

The probability of any stock outperforming the market is low. In 2022, only 12% of stocks in the Nasdaq-100 index meaningfully outperformed the index, and only 1% outperformed the index by more than 50%.

On a longer timespan, index funds have produced higher risk-adjusted returns than all but a handful of stocks. The average equity investor underperformed the S&P 500 by 4.32% over the 20 year period from 1992–2011. Since 2002, over 80% of Nasdaq-100 stocks underperformed the index over a 5-year period, and 85% underperformed over a 7-year period.

With Cache as your exchange fund provider, you’ll exchange your equity for a diverse set of investments, all without triggering taxes. This tax deferral ensures that the full value of your equity stays invested in the market, compounding over time. Assuming historic stock returns, this could add to a sizable advantage over time.

With Cache Exchange Fund
Without Cache Exchange Fund

What are the eligibility requirements for a Collar Advance transaction?

An ETF ("exchange-traded fund") is a fund that can be bought and sold on public exchanges. They typically hold a pool of stocks and/or bonds towards a particular investment objective. You can buy ETFs with your money at most brokerages.

An exchange fund is a tax-efficient private fund owned by investors who exchange their individual stock for shares in the fund. Exchange funds only accept “in-kind” stock contributions, not money. Also, shares in the fund cannot be bought or sold on public exchanges.

The understandable confusion between “exchange fund” and “ETF” is caused by the two very different definitions of “exchange” in their respective names.

We've rethought exchange funds from the ground up, turning a mostly manually-run operation into a highly precise and automated solution accessible to a much larger audience.

What's the regulatory framework under which exchange funds are offered?

Exchange Funds are private placement offerings under Regulation D of the Securities Act. Other well-known Reg D offerings include Venture Capital, Private Equity, and Hedge funds. Like these investments, exchange funds are intended for sophisticated investors who understand the risks and benefits of investing in these vehicles. As such, Reg D funds are limited to Accredited Investors only.

What's the investment objective of the exchange funds? Which stocks do you accept?

We accept high-quality stocks that help us meet our investment criteria built around popular stock indices. In general, the stock has to be listed on a major exchange with a market cap of at least $1B.

We prevent any adverse selection by acting as gatekeepers of quality. Rest assured, you'll have an opportunity to review the portfolio before confirming to participate in an exchange fund.

To meet the regulatory requirements for a properly structured exchange fund, the fund needs to hold at least 20% of its assets in qualifying illiquid assets such as real estate. We work with leading institutional real-estate investment managers, and each exchange fund will aim to hold high-quality income-generating real estate. Complete details of the qualifying assets are available in individual fund documents.

How does the reservation process work?

Please enroll for an upcoming fund by clicking on "Get Started". You’ll share some info about your concentrated stock holdings and cost basis. Our team will make sure you’re eligible to participate, and our algorithms will carefully put together a pool of investors for the fund. When we find the right match for you, you’ll get notified to proceed with the contribution.

How does the fund formation process work?

Once investors have signed-off on their contributions, the stocks are pooled in a fund registered as a Delaware Limited Partnership. Our independent third-party fund administrator will set the Net Asset Value for the fund, which helps determine each investor's percentage ownership. Certain qualifying asset investments, such as real estate investments, are made to ensure compliance with the regulatory requirements of an exchange fund.

Fund shares will be issued through our transfer agent and show up on your Cache brokerage account. The fund assets will be held at BNY Mellon, an institution with decades of experience in asset custody.

My stock has a significant correlation to Nasdaq-100? Should I still diversify?

When you own a Nasdaq-100-like exposure, you will own a diversified portfolio of stocks. The return and risk of the investment will be realized through the performance of the portfolio. Some stocks in the portfolio will do better than others, but an individual stock will not represent 100% of your investment risk or return.

On the other hand, when owning a single stock, 100% of your risk and return is tied to that single stock. While any individual stock may do well, without knowing the future, there is inherently more risk to have 100% of your exposure in a single stock versus a diversified portfolio. A single challenging quarter, change in customer tastes, or company misallocation of resources can change a company’s forward-looking prospects.

Lastly, if you hold a tech stock that seems to correlate with the Nasdaq-100, you are able to trade your single-stock risk to a diversified exposure while maintaining a similar return profile with the Cache Exchange Fund. Elimination of business risk and concentration risk, while maintaining a similar upside.

Can I meet my $100K minimum with more than one company’s stock?

Yes, you can contribute vested stocks from multiple companies.

How will redemptions work once the fund “matures”?

At redemption, we’ll distribute a diversified basket of stocks to each investor, while matching their ownership percentage and cost basis, so long as you’ve met the minimum investment timeframe. We don’t charge any redemption fees.

All our exchange funds are perpetual-life vehicles, which means they will continue to grow in a tax-deferred manner, even after seven years. You can also roll over your redemptions to another exchange fund.

Is there a taxable event at the end of 7 years? What will I receive and what are the redemption fees?

There isn’t a “sale” at the end of 7 years, and thus, there isn't a taxable event at withdrawal either. The investor places a withdrawal request, which is satisfied by distributing a basket of shares that matches their pro-rata ownership.

When investors withdraw from the fund, they receive a diversified basket of shares, usually consisting of 15-25 different stocks, in exchange for their original contribution. The basket of disbursed shares will have a cost basis equal to the original contribution, with possible optimizations to tax-loss harvest within the distributed basket.

Cache does not charge a redemption fee after the investor has spent seven years.

How will redemptions work if I haven’t completed the required time commitment?

We institute a two-year lockup on the shares contributed to the fund and generally encourage long-term investors to participate. The reason: each pool is carefully weighted to achieve certain investment goals, and redemptions hurt your fellow investors. If you have short-term liquidity needs, this investment is not for you.

To gain the full benefits of the exchange fund, regulations require a seven-year holding period. Redemption requests after the lockup but before the seven-year mark 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 2% penalty fee. Please refer to the fund documents for a full set of redemption terms.

How does the seven-year holding requirement compare to other options?

The requirement is significantly shorter than alternative tax-advantaged investments. Charitable trusts terms require a 20+ year holding period. Depending on your age, an IRA or 401(k) might require up to 40 years before you can withdraw your investment without penalties.

Exchange Funds
7 years
Charitable Trusts
20 years
IRA
30–40 years
401K
30–40 years

Can I borrow against my fund shares?

If you need to access liquidity against your exchange fund shares, we can arrange for you to borrow against these shares directly with Cache.

Can I sell or transfer my fund shares?

Like any private funds, such as hedge funds or VC funds, there are no public exchanges for these shares. Fund shares will be redeemed by Cache only, or through the custodian and fund administrator in the event that Cache is no longer operational. Fund shares can be transferred through gifts or inheritances.

How are dividends and other income treated?

When you contribute the stock to a fund, any dividends that are received from the stock are additive to the fund balance sheet. Generally, Nasdaq-100 is not a high-dividend yielding basket, and the generated cash will be used to help achieve the investment objective through portfolio management techniques such as hedging and synthetic exposures.

Income earned through dividends, stock lending, real estate dividends, and real estate appreciation are distributed to the investors on a discretionary basis upon determining the best use for the cash balance.

Can I participate through my trust or LLC?

Yes, Cache allows legal entities such as trusts and LLCs to register for a brokerage account, and participate in the Exchange Funds.

What if I don’t meet the minimum investment amount?

Even if you don’t meet the minimum, you can reserve a spot. Our team will be able to waive the minimum on a case-by-case basis for select stocks that help with overall investment objectives.

Why do you institute a two-year lockup?

We have a 2-year lockup to ensure only long-term investors contribute to the fund. Since the tax benefits do not kick in until seven years, it is customary to institute forced illiquidity to disincentivize short-term investors.

Is it okay to contribute a company’s stock if I still work there?

Probably, but it depends on your company’s policy and your position in the company. If you’re not sure, that’s okay. We’ll make sure you’re eligible to participate before you contribute. Many large firms like Apple, Nvidia, Microsoft, Meta, Tesla, and Amazon have friendly policies.

Generally, we encourage companies to follow the standards set by Apple. In their 2022 Proxy Statement, they include, "We allow for certain portfolio diversification transactions, such as investments in exchange funds."

Can I contribute unvested equity?

No, we can only accept fully vested stocks. Exchange funds are a good fit if you have taxable gains on those holdings.

How does Cache determine and charge fees?

Our fees are considerably lower than other exchange funds. We determine fees based on the gross assets in the fund, and management fees are charged quarterly.

Our fee is mainly charged from the income generated from the funds, and as a general principle, we don’t sell any stock with taxable gains to generate cash for our fee. Compare fees

How are investors and their investments protected if Cache is no longer viable?

Our legal documents provide higher investor protections in these instances (than customary).

“Anything in this Agreement to the contrary notwithstanding, the Manager may at any time resign if (i) the Manager has designated and admitted to the Fund as a successor Manager any corporation, trust, business trust, limited liability company, partnership or other entity that is wholly owned, directly or indirectly, by Cache (provided that such corporation, trust, business trust, limited liability company, partnership or other entity has, or its personnel have, similar management experience to Cache) and each of the Shareholders, by acquiring Shares of the Fund, hereby consents to the admission of such successor Manager; or (ii) the Manager, with the Consent of the Shareholders, has designated and admitted a substitute Manager; provided that any such succession or substitution shall be effective upon such resignation and shall not in the opinion of tax counsel to the Fund adversely affect the classification of the Fund as a partnership for federal income tax purposes. In the case of the Bankruptcy of the Manager (herein in such event called a “Bankrupt Manager”), those Shareholders holding a majority of the outstanding Shares shall have the right to designate and admit to the Fund a substitute Manager by filing written consents to such action with the records of the Fund.”
"Shareholders will have the limited right to consent to… (ii) the designation of a substitute manager of the Fund upon the bankruptcy of the Manager or if the Manager resigns as manager and does not designate a Cache affiliate as substitute manager."