The Collective Charitable Exchange Fund
The Collective Charitable Exchange Fund provides certain private company shareholders with a highly efficient way to contribute their shares to Donor Advised Funds and Charitable Remainder Trusts
Why use Collective for your DAF or CRT?
Know the precise value of your donated shares upfront
- Valuations for most exchange eligible companies are immediately available
- Know the amount of your tax deduction before you commit to donating
- Valuations determined by algorithm based on primary financings and secondary trade data
Access liquidity to fund your grants and distributions
- The Fund offers quarterly cash redemptions to fund grants and distributions
- Eliminates the need to liquidate shares by sourcing a buyer or retaining a broker
- Avoids potential friction with the company over acceptance of proposed buyer as new shareholder
Professional staff to simplify and manage the transactions
- Collective's expert staff processes the transactions for you
- Most companies welcome Collective as a new, institutional, long-term shareholder
- Standardized documents and processes significantly reduces legal expenses and shortens timelines
Charitable Exchange Fund
How the Charitable Fund works with Donor Advised Funds and Charitable Remainder Trusts
Shareholders of selected private companies exchange their shares for a limited partnership interest of equal value in the Charitable Fund without triggering capital gains tax and then contribute that interest into either a Donor Advised Fund ("DAF") or a Charitable Remainder Trust (“CRT”).
In the case of a DAF, the contribution of the partnership interest generates an immediate tax deduction equal to the value of the partnership interest (which is equal to the value of the shares) that can be used over the next five years. The limited partnership interest can be redeemed for cash annually after a holding period and the redemption proceeds used to make grants to the donor's charities. You can learn more about DAFs and calculate an estimate of your tax savings and cash to fund donations here.
In the case of a CRT, the contribution of the partnership interest to the trust generates an immediate tax deduction based on the value of the partnership interest (which is equal to the value of the shares). The limited partnership interest can then be redeemed for cash annually after a holding period and the redemption proceeds used to make distributions to the donor or their assignee. You can learn more about CRTs and calculate an estimate of your tax savings and distributions here.
How an Exchange Fund works
The Collective Charitable Exchange Fund is a pooled investment vehicle enabling shareholders in selected private growth companies to contribute their shares into the Fund without triggering a capital gains tax. In return, they receive a limited partnership interest in the Fund of equal value. So, for every $100,000 worth of shares contributed into the Fund, the shareholder receives a $100,000 limited partnership in the Fund. That partnership interest can then be contribute to a Donor Advised Fund or Charitable Remainder Trust.
How shares exchanged into the Charitable Fund are valued
Collective generally has a valuation immediately available for prospective donors' shares. This is made possible by the Collective Private Market Valuation Algorithm. It values the private company shares exchanged into the Fund and for determining NAVs. The algorithm outputs real time valuations of private growth companies based on the best available market data. This data includes valuations implied by a company's primary financing, secondary transactions and many other pricing signals. In certain cases where market data is insufficient to rely solely on the algorithm to value shares, Collective can utilize alternative valuation methodologies.
How an Exchange Fund works
The Collective Charitable Exchange Fund is a pooled investment vehicle enabling shareholders in selected private growth companies to contribute their shares into the Fund without triggering a capital gains tax. In return, they receive a limited partnership interest in the Fund of equal value. So, for every $100,000 worth of shares contributed into the Fund, the shareholder receives a $100,000 limited partnership in the Fund. That partnership interest can then be contribute to a Donor Advised Fund or Charitable Remainder Trust.
Portfolio Company Eligibility
Only shares of venture-backed, private companies selected by Collective's Investment Committee may be exchanged into the Charitable Exchange Fund. To select companies for exchange eligibility, the Committee first reviews U.S. Private companies valued at more than $250mm in a round of financing occurring within the previous 18 months. It screens these companies for a number of objective criteria, including the backing of certain recognized venture capital firms. The Committee then evaluates the companies meeting these criteria for the soundness of their business model, their traction in their respective markets and the quality of the management team. The resulting list of the companies eligible for exchange into the Fund is continuously updated and is published on the Collective website.
Asset Diversification Strategy
The Charitable Exchange Fund seeks to create a relatively stable asset base by holding a diversified portfolio of venture-backed, private companies that will generate substantial grants to charities and distributions to donors over the long term. Over time, the Fund will target a maximum allocation within its securities holdings of 30% in any industry sector and 10% to any individual company. To preserve the Fund's favorable tax treatment for exchangers under the U.S. tax code and enhance its diversification strategy, the Fund also holds approximately 20% of its assets in real estate investments. These real estate investments are generally managed investment vehicles holding mature, stable properties diversified across type e.g., residential, industrial, etc. and across U.S. regions.
Charitable Fund Targeted Exposure
Number of Eligible Companies Backed by Leading VCs
Experienced Team
The Charitable Fund is overseen by the Collective Investment Committee. The Committee is comprised of experienced venture capitalists and fund managers. The Committee is responsible for selecting companies for the Fund's portfolio and overseeing the Collective Private Market Valuation Algorithm which dynamically prices portfolio company shares.
Questions?
Talk to a Collective Representative
A Selection of Companies Eligible for Exchange into the Charitable Exchange Fund
Many of the most successful VCs are invested in our Exchange Eligible Companies: Learn more
Fund Facts
Fund Details
To provide Donor Advised Funds or Charitable Remainder Trusts with the liquidity from which to make grants and/or distributions, the Charitable Fund permits redemptions of limited partnership interests for cash at the end of each quarter . After a three-year holding period, a limited partner may submit a redemption request for some or all of their interest in the Fund. Fund interests are redeemed at a purchase price implied by the Fund's Net Asset Value at the end of the quarter. The Fund's redemption obligations in any given quarter are limited to 4% of the Fund's aggregate Net Asset Value.
Risks of the Collective Charitable Fund
Investments in portfolios of private growth companies are inherently risky and there are also potential risks specific to exchange funds. Some of these risks include:
- Performance is not guaranteed. It is possible that the position(s) a shareholder contributed to the Fund will outperform the Fund's portfolio. The Fund may also fail to match the performance of the overall late-stage, private growth asset category.
- Liquidity may be restricted. Though the Fund offers quarterly redemptions to its limited partners beginning on the first anniversary of their contribution, such redemptions are subject to restrictions in some circumstances. These restrictions are described in detail in the Fund's Private Placement Memorandum and other subscription documents.
- Tax laws are subject to change. Although any change to the favorable treatment exchange funds receive would most likely be grandfathered in for current investors, it is possible that taxing authorities could elect to make such changes retroactive.
- Fees can impact returns. The Exchange Fund charges annual management and performance fees, which can have a material impact on performance.
- Real estate assets are included in the fund. Exchange funds generally need to invest at least 20% of fund assets in certain non-security investments—usually satisfied by purchasing real estate. These assets may adversely impact performance, increase risk and expose the fund to interest rate movements.
For a more complete description of these risks and a description of other risks related to an investment in the Collective Liquidity Fund, please review the Fund's Private Placement Memorandum, available for download from Collective Liquidity.
Disclosures
This information relating to the Collective Liquidity Fund, LP (the “Fund”) has been prepared solely for informational purposes, is not complete, and does not contain certain material information about the Fund, including important disclosures and risk factors associated with an investment in the Fund, and is subject to change without notice. It does not constitute an offer to buy or sell an interest in the Fund, nor shall there be any sale of a security in any jurisdiction where such solicitation or sale would be unlawful.
The Fund's limited partnership interest will not be registered with the U.S. Securities Exchange Commission or other regulatory authority. Investors will be required to verify their status as an “Accredited Investor” pursuant to Rule 501 of Regulation D to participate in any offering of the Fund's limited partnership interests. No securities commission or regulatory authority has recommended or approved any investment or the accuracy or completeness of any of the information or materials provided by or through Collective Liquidity, Inc. or Collective Asset Management, LLC (collectively, “Collective Liquidity”).
Limited partnership interests in the Fund are not insured by the FDIC and are not deposits or other obligations of Collective Liquidity and are not guaranteed by Collective Liquidity. Limited partnership interests in the Fund are subject to investment risks, including possible loss of the principal invested.
Prospective investors should consider the investment objectives, risks, fees and expenses of the Fund carefully before investing in the Fund. This and other important information are contained in the Fund's Confidential Private Placement Memorandum (“PPM”), which can be obtained by contacting Collective Liquidity.
Investment in the Fund involves substantial risk and any offering may only be made pursuant to the relevant PPM and the relevant subscription application, all of which must be read in their entirety. No offer to purchase securities will be made or accepted prior to receipt by the offeree of these documents and the completion of all appropriate documentation. The Fund intends to primarily invest in securities of private, late-stage, venture-backed growth companies. There are significant potential risks relating to investing in such securities. The Fund is not suitable for investors who cannot bear the risk of loss of all or part of their investment. The Fund is appropriate only for investors who can tolerate a high degree of risk and do not require a liquid investment. The Fund has no history of public trading and investors should not expect to sell limited partnership interests in the Fund. No secondary market exists for the Fund's limited partnership interests, and none is expected to develop. The Exchange Fund has a limited operating history, and its performance is highly dependent upon the expertise and abilities of its manager. There is no assurance that the Exchange Fund's investment objectives will be achieved, and results may vary substantially over time. This is not a complete enumeration of the Fund's risks. Please read the Fund's PPM for other risk factors related to the Fund. Although the manager of the Exchange Fund will value its portfolio using the Private Market Valuation Algorithm, it can be difficult to obtain financial and other information with respect to private companies, and even where the manager is able to obtain such information, there can be no assurance that it is complete or accurate. Because such valuations are inherently uncertain and may be based on estimates, the manager's determinations of fair market value may differ materially from the values that would be assessed if a readily available market for these securities existed.
The information contained herein does not constitute a recommendation or advice by Collective Liquidity. You should consult your own tax, legal, accounting, financial or other advisers about the information discussed herein based on your specific risk profile and financial situation, including the suitability of an investment in the Fund, with Collective Liquidity, or any product managed by Collective Liquidity.
The information contained herein is for informational purposes only. This material contains the current opinions of Collective Liquidity and such opinions are subject to change without notice. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission.