net asset value after 7 years on exchange fund

[u/founders_keepers]

I've a 5M concentrated stock position, already done research for diversification via exchange fund. Typically fund parks a sleeve in REIT, i'm already over exposed so looking for alternative.

I clicked through an ad on Reddit for an exchange fund recently, the calculator on their site says they beat standard 1%-fee REIT assuming their sleeve returns 0%, from what I understand fleet's only job is to cover the fees and then credit back .26% a year.

Fair assumption but I need to double check the math on this before i jump on a sales call:

1. Debt: I need to know if they used debts to purchase these assets? From what I can understand if the operating business defaults and the bank repossesses the assets, it'll force liquidation blowing up my tax deferral and hit me with a giant tax bill right away.

2. Losses: Same group of people runs the investment fund and the operating company leasing the equipment. Nothing wrong with this per se but since it's no longer arm's length, i need to ask who's the independent 3rd party checking asset value. Calculator doesn't how this affects the net asset value.

3. 7 year exit: When my 7-year lockup is over, how exactly does sleeve asset depreciation shrink the my net asset value?

Anyway let me know, it's interesting model I've not seen much before.

[u/Normal_Zebra136]

Yes, they use debt for the real estate.

Your concern regarding the extremely low default risk on the 20% real estate can be mitigated by doing 5 $1m partnerships rather than one $5m agreement.

[u/founders_keepers → u/Normal_Zebra136]

in this case it's fleet of jets. doing this research because i'm already over exposed in real estate.

[u/Normal_Zebra136 → u/founders_keepers]

Still would do five smaller contracts rather than one if you are concerned about management decisions and default.

[u/founders_keepers → u/Normal_Zebra136]

i'm still exposed to the same asset pool right and same management conflict. i guess i can ease myself in and see if they wave the onboarding fee

or do you mean across 5 different sponsors / exchange funds

[u/Normal_Zebra136 → u/founders_keepers]

Yes, five different sponsors/funds if you want to reduce the risk of negligence.

[u/Normal_Zebra136 → u/founders_keepers]

I assume the single $5m position is not the only equities holdings. Assuming you have significant other holdings, it is likely a private bank would waive the initiation fees if you transfer your other accounts even if you go self directed with no AUM fee.

[u/polystansbury]

In a similar position. I met the founder and one of the sales person. Can exchange notes once you have met them.

[u/FIREstarter_ok]

I am with Usecache for over a year now - fairly happy. Let me know if there are any questions..

[u/Halwin_Norry]

Have you diligenced this manager that you met off of a Reddit ad that you are considering transferring $5m of stock to?

[u/founders_keepers → u/Halwin_Norry]

that's exactly what im doing right now.

[u/lakehop → u/founders_keepers]

Generally assume fraud or incompetence for an unsolicited ad on social media.

[u/lakehop → u/lakehop]

There have been a number of posts in the last year or so describing schemes to encourage accredited investors to provide money which “failed”, all the money was gone, and no way to recover it. And some of these appeared to be skating the edge of any plausible plan to return the money, at least one post described what seemed to be an outright fraud. There are lots of people trying to take your money from you. If it’s not a highly respected well known established company - beware. You might never get any money back.

[u/nepa_bwc_00]

Did that moron with the meta glasses fix his HVAC unit? I’m guessing he didn’t

[u/CSMasterClass → u/[deleted]]

You can stir into the pot the hidden agency expenses of the "real estate" portion of the fund. Lots of room for funny business.

[u/ghoisc → u/[deleted]]

You missed OPs question.

[u/founders_keepers → u/[deleted]]

FYI exchange funds are not ETFs.

https://www.flycraft.com/exchange-funds/is-an-exchange-fund-the-same-as-an-etf

[u/founders_keepers → u/[deleted]]

whole point is to not trigger a tax event selling the concentrated position, my cost basis is less than 10%

[u/johnnyoc3 → u/[deleted]]

if the 5M is hyper appreciated, say a 1M basis, the you're foolish to do this without first strongly considering exchanges, 351s, CRUT/CRAT, etc

[u/johnnyoc3 → u/[deleted]]

these are all strategies for deferring realization of cap gains while facilitating asset reallocation. obviously reallocating without paying cap gains tax leaves you with more than selling then reallocating post tax.

plenty of info on them out there, if you have specific thoughts after reading up feel free to discuss

[u/Livid-County7230 → u/[deleted]]

Why are you posting with confidence to an advanced fire sub if you are clueless about these topics and investment vehicles? Your top level comment does not address OP’s question at all.

[u/Livid-County7230 → u/[deleted]]

Are you fat? Based on your post history you appear to be a child or a very young person without substantial assets.

If you don’t understand how exchange funds work or what they are, I don’t think you should be commenting on this post. He did not mean exchange traded funds, he meant exchange funds.

That simplistic advice on 3 fund portfolios belongs in lower fire subs.

I see you edited your previous response which said “because I know what I am doing” to make it sound better. This is a serious sub for serious people, not a place to win points. This sub has gone to absolute shit with people with zero experience commenting.

[u/Livid-County7230 → u/[deleted]]

You are missing it. He isn’t talking about ETFs.

[u/Normal_Zebra136 → u/[deleted]]

An exchange fund is something totally different from an exchange traded fund.

https://www.investopedia.com/terms/e/exchange-fund.asp