FAQ

Accredited investors who meet suitability and compliance standards are eligible to invest.

As of October 2019, the current requirements for individual accreditation are:

A) $200,000 Gross Annual Income ($300,000 if married), or

B) $1,000,000 in net worth excluding the value of your principal place of residence

Please be aware that the SEC may change the accreditation requirements in the future and thus should be verified at this link, prior to investing.

Certainly; as long as the required compliance checks are completed (accreditation, background and ID checks for regulation, Anti-Money Laundering and Office of Foreign Assets Control list, etc.), from a U.S. perspective, you are eligible to invest. These are required for all customers, whether domestic or international.

Additionally, the fund has been structurally established in a manner that is particularly attractive to an international investors. We have established a Cayman Master fund with a Cayman-based feeder fund for U.S. Tax-exempt investors and a Delaware feeder fund for U.S. non-tax exempt investors.

EQUIAM's outside counsel is Tannenbaum Helpern Syracuse & Hirschtritt LLP for U.S. matters and Ogier for Cayman matters. EQUIAM's fund administrator, MaplesFS, is a global organization with a proven track record of providing premier fund administrative services. EQUIAM funds are audited by KPMG on an annual basis.

Please note that we do not provide legal counsel to investors. All parties are responsible for making sure they understand the benefits and risks of this asset class and any associated transaction.

Yes; we just would need additional documentation to prove your ownership or authority to transact on behalf of such a vehicle. Again, standard compliance requirements.

Diversification and exposure.

The private tech market is quickly becoming a meaningful portion of the suite of asset classes available in today’s financial markets. Assuming you already have a sufficiently diversified portfolio across a range of safe and moderately safe securities, it is certainly worth considering for inclusion in a balanced portfolio.

Of course, each investor's situation is different, and suitability is a case-by-case conversation. But for many accredited investors, later-stage private market investments can certainly offer compelling investment opportunities while the companies are in the rapid value creation phase.

In public and liquid markets, strategic advantages and inefficiencies have been squeezed out through greater automation, high-frequency trading, and increasing correlation between asset classes.

However, there is still opportunity available for private technology investors.

Currently, this asset class is only available to very large institutional investors (hedge funds, private equity firms, venture capital funds).  We’re bringing access to accredited investors, family offices, and boutique investment firms. We’re putting the control and access back in the hands of the check-writers, at a variety of sizes.

For a sufficiently large pool of capital, exposure to as many asset classes as possible is crucial. As one of our advisors reminds us, diversification is the most conservative strategy of all. This is especially true when that asset class is uncorrelated to the rest of your portfolio.

Private technology investments are compelling because:

• Diversification amongst conventional asset classes is rapidly rising; equity markets, commodities, corporate debt, are all moving in lockstep

• Private tech companies are growing rapidly by disrupting massive addressable markets (while traditional industries have stagnated)

• Their eccentric growth produces compelling returns that are frequently orthogonal to conventional assets

Source: Charles Schwab Investment Advisory, Inc., with data from Morningstar Direct.

EQUIAM provides diversified access to the private technology asset class. This diversification minimizes risk compared to single company stock picking, yet due to the nature of private investments, this asset class is intended for investors who pass the accredited investor threshold. We ensure each investor passes suitability requirements for an investment before closing, and we may decline to complete the transaction if it does not seem appropriate for that investor’s situation (income, net worth, or other circumstance).

If you are a potential investor, it’s important to understand the key characteristics and risks of private market investments before deciding to move forward with even a small allocation, including:

• They are illiquid investments, and your capital may be locked up for long periods of time

• They are risky investments and you may lose some or all of your principal

• There is often little information available to potential investors since access is limited by companies

• There may be legal, regulatory, and tax risks associated with each investment

We strongly recommend consulting with your financial advisor, legal counsel, tax accountant, or others when considering an investment. If you’re still not sure at the end, it is likely that EQUIAM is not a good fit for you.

Yes. We have created a number of data-driven proprietary assessment metrics that allow us to eliminate companies that do not meet the Fund's minimum threshold for investment. While we can't disclose our exact methods, we look at a variety of factors related to company health, growth, and the interplay between private market and broader macroeconomic conditions.

From a historical perspective, our proprietary filters would have successfully excluded a number of firms (e.g., WeWork, Uber, and Lyft) from our addressable universe. We will never invest in a firm that is simply using venture capital to subsidize its unprofitable/unviable business. The public markets have punished firms that fit this mold and we have the data and insight to avoid these investments.

We performed rigorous analyses on private company performance during the most recent financial crisis (2007 - 2009) and the immediate years following. 

We analyzed all late-stage, U.S.-based, private technology companies that: 

• Were founded between 1/1/1996 & 12/31/2006 (58,000+ companies)
• Raised a Series C+ round between January 1st, 2004 and December 31st, 2006 (pre-crisis) (756 companies)
• Were still privately operating as of 12/31/2006 and had verified enterprise valuation data available (219 companies)

If you had invested equally across all 219 companies on December 31st, 2006 at the valuation of each companies' most recent funding round and held those positions through the earlier of their private market exit or December 31st, 2012, you would have realized an IRR of 20.4%.

In comparison, the S&P500 and Nasdaq100 generated IRRs of 0.1% and 7.13%, respectively, over the same period.

EQUIAM successfully deployed into 30 targeted positions over a 6.5 month time horizon following their Q1 2019 launch of their flagship, EQUIAM Private Tech30 Fund I. EQUIAM has proven their capability to deploy in a rapid and effective manner.

On a forward-looking basis, EQUIAM has strategically partnered with Forge a leading private secondary marketplace that has brokered $2Bn+ in historical secondary transaction volumes. Forge has facilitated transactions within the past 12 months in the vast majority of the Fund II targeted components and has open offers for several of the remaining. EQUIAM will work closely with Forge to source the remaining, untapped supply. 

In addition, EQUIAM will work frequently with other platform based broker-dealers, lone-wolf brokers, and directly with the issuers. Total direct secondary annual trading volumes are estimated to be well in excess of $50Bn with a significant percentage of that volume concentrated in the top 30 - 60 companies. With a mere $100M mandate, EQUIAM will be investing no more than $2.5M - $5M into a single issuer. Since every targeted company has a secondary valuation in excess of $500 Million, the average percentage investment in these companies will range from ~0.01% (low-end) to ~0.5% (high-end). In any scenario, these are tiny fractions of these organizations; hence supply can be efficiently sourced from traditional sources (i.e. Venture, PE, Angel investors) as well as a blend of early and rank & file employees.

The fund is a closed-end fund with an established 4-year fund life (plus two potential 1-year extensions should market conditions dictate such a decision). Hence, we expect our investors to remain invested in the fund for the duration of that period. In comparison to the standard 8 to 10-year fund lives of most venture and PE funds, we feel our time frame is quite reasonable.

With that said, we are acutely aware of the importance of liquidity. As a result, we have structurally designed the fund to self-liquidate over the duration of the fund life. 

During the first eighteen (18) months following the final closing (planned for Q2 2020), the fund intends to reinvest all received proceeds from exits back into the fund. Following the expiration of the reinvestment period and for the remaining life of the fund, all exit proceeds will be delivered pro-rata to the investors in the fund, analogous to a dividend.

The primary ways a company will exit the fund will be via (1) IPO and (2) Acquisition.

Finally, we will allow for LPs to seek a sale of their stake via secondary brokerage platforms, such as Forge, but these sales are subject to normal market conditions and we cannot guarantee there will be willing buyers in the market.

The rebalancing process is guided by a framework, but it must be properly described as discretionary. The rebalancing framework guides which companies are to be brought before the investment committee for divestment/investment determination.

The framework is as follows: 

1) On a quarterly basis we will compare the actual components in the Private Tech30 Fund II versus the Enhanced Private Tech30 Index (EPT30), should one of the current fund components have "dropped out" of the index, we will place that component on notice for the following quarter's rebalancing assessment. If in the subsequent quarter rebalancing assessment, the on notice component has remained outside of the index, it will be brought before the Investment committee for careful scrutiny as a divestment candidate. The review will include a market sentiment assessment, conversations with market operators/broker-dealers, fundamental analysis if financials are available, and, if possible, potential strategic discussions with issuer representatives to determine the long-term viability of the position.

If the component is chosen to be divested, it will be sold in a prompt manner, but of course only at a fair market price and only if there are willing buyers in the market. Assuming the component is successfully, and fully, divested, those proceeds will be invested into the new component that has "jumped" into the index that initially caused the "dropped" component to fall.

2) Due to transactional costs, we will do our best to avoid liquidating (1) partial positions and (2) any positions that have been held for <12 months to avoid short-term taxable gains. However, if a component increases in value to a point that it then comprises 15%+ of the total fund value. We will bring that component under careful review during our quarterly rebalancing assessment and determine whether a partial divestment would be suitable. In most cases, our management team, in conjunction with the investment committee, would advise a 50% divestment. The proceeds of such divestment will be used to bring the remainder of the fund into as close of balance with the current EPT30 percentage allocations.

Finally, it is critical to note the self-liquidating nature of the fund. After the reinvestment period ends (i.e., 18 months after the final closing), when components (1) go public, (2) get acquired, or (3) enter forced liquidation (i.e., bankruptcy) -- the number of components in the fund will decrease in number. (i.e. 30 -> 29 -> 28 -> 27, and so on and so forth.)

Yes, there is a likelihood of a small initial tracking error due to the following two scenarios:

(1) The fund will never initially invest in a public company; whereas, the index will, for short periods of time, include publicly traded companies. This is due to the common lock-up provision that prevents pre-IPO equity holders from selling their shares in the public markets until ~180 days following IPO. Hence, during the initial fund investment efforts, if public companies are present in the EQUIAM Enhanced Private Tech30 Index (EPT30), they will not be pursued for investment purposes by the EQUIAM Private Tech30 Fund II, instead, the fund will replace the publicly-traded Index component with the next highest-ranked private company. 

(2) If the Index includes a private company that has severely onerous transfer restrictions and after substantial effort, it is deemed unlikely that an investment will be possible, the fund will, again, move on to the next highest-ranked private company in the universe of considered companies. The EQUIAM Private Tech30 Fund II Private Placement Memorandum (PPM) stipulates that the fund is eligible to invest in 30 of the top 40 private companies that meet the index inclusion criteria.

Additionally, as the fund matures, the tracking error will undoubtedly fluctuate. It is unreasonable from both a cost and operational perspective to rebalance the fund any more frequently than on a quarterly basis. 

Those rebalancings will be subject to certain, unavoidable risks such as lack of demand for "losing" positions and extreme supply constraints when attempting to purchase "winners". Additionally, some companies may grow far more rapidly than anticipated, as such that a component significantly breaches the 15% threshold at the midpoint of a quarter. In these cases, we will not pursue an "emergency" rebalancing process, but rather wait until the scheduled quarterly rebalancing review. 

Next, the fund will be self-liquidating over time as the initial components go public or are acquired. Naturally, this will create a tracking error in comparison to the thirty (30) component EPT30. However, the fund will seek, via its quarterly rebalancing periods, to remain closely in line with the first several components of the index. For instance, if the EQUIAM Private Tech30 Fund II has 20 components at a specific point in time, all rebalancing efforts will be guided by the first 20 components of the EPT30.

Yes, at times. Initially, all components will be private companies. However, immediately following a public offering, we will be bound by the standard lock-up provision, hence for around ~180 days, we will be holding public securities. We will plan to fully liquidate the public position, guided by the Investment Committee, within 1 quarter of the lock-up expiration.