March 23, 2021 | Webinar

SharesPost 100 Fund Q1 2021 Update and Outlook

CHRISTIAN MUNAFO: Okay, it’s the top of the hour so why don’t we go ahead and get started. Good morning and welcome, everyone, and thanks for joining us for today’s webinar. I’m CHRISTIAN MUNAFO, the chief investment officer of Liberty Street Advisors, the investment advisor to the SharesPost 100 Fund. And I’m joined by KEVIN MOSS, managing director at Liberty Street and president of the SharesPost 100 Fund.

KEVIN MOSS: Hi, everyone. Thank you for joining us today.

CHRISTIAN MUNAFO: So, it’s hard to believe but this marks our fifth consecutive webinar in which both Kevin and I are joining you from separate locations, given the ongoing COVID-related precautions, and we’ll be using screen-share for our presentation, which means that you may not be able to see us.

As noted in the past, our objective is to always get in front of our shareholders on a quarterly basis to provide what we believe are relevant updates. Since the last time we spoke in mid-December, quite a lot has happened. First, it’s now been a few months since our investment advisor transition has been completed, so we’ll provide some brief updates on that topic. And, again, we are very grateful for all of your support in connection with that process.

Second, Kevin will touch on this in more detail as we move through the presentation, but fund inflows are at record levels. We continue investing on behalf of the fund by both increasing existing positions and also adding new names, and the portfolio has been performing well with additional exit activity that we’re excited to report.

Third, there’s also been clearly an increase in some macro volatility as interest rates have started creeping up, leading to some portfolio rebalancing in the public markets, and the rotation into what is now widely called reopening trades. And there is some trickle effect into some of the positions in the fund as well as into the overall private market, which we’ll touch on.

Related, we are very pleased with and encouraged by progress that continues to be made with the COVID-19 vaccine rollout, and we hope to be meeting again in person with many of you in the not too distant future. And, as always, we welcome your suggestions on future topics to cover, so please share your thoughts. We also welcome your questions. If you prefer to address them offline, that’s also fine.

We are using a different platform today – Zoom, which many of you are likely quite familiar with by now. So, if you would like to submit questions during this presentation, we encourage you to utilize the Q&A box on your screen and we’ll try to respond before the end of our webinar.

With that, I’m going to kick it over to Kevin to touch on the agenda for today.

KEVIN MOSS: Thank you, Christian. Yeah, so to set the agenda for today, we’ll start off by reviewing important corporate developments. We will then touch on topics that we heard of are of interest to the audience as well as key benefits of the fund. Christian’s going to review our market perspective, and then we’ll go over some standard fund updates and details, and then we’ll close on our thoughts on where we think the market is heading. 

Finally, as we have in the past, we’ll try to take some time to answer some questions. As we have in the past, any questions we don’t get back to you today, we’ll follow up directly (indiscernible).

So, let’s just jump into the corporate update. As a corporate update, on December 9th, the SharesPost 100 Fund completed its transition to Liberty Street Advisors as the investment advisor to the fund. LSA was founded in 2007 and is an SEC-registered investment adviser that currently manages eight mutual funds with AUM over $1.5 billion.

And just to be clear, the SharesPost 100 Fund’s investment team, the strategy, the governance structure, the board of trustees, the service providers, all this will remain unchanged. As part of the transaction we really wanted the fund to remain exactly the same. But Liberty brings an enormous amount of experience and distribution

The transition process so far has been very smooth. There’ve been no operational business or investment disruptions at all for the fund. The fund is going to be marketed by LSA’s affiliate broker dealer, HRC Fund Associates. HRC was also founded in 2007. It is an SEC and FINRA-registered broker-dealer and it has longstanding relationships with financial advisors. So, we really think this was an ideal fit for the fund in many, many ways.

Finally, in connection with the transition, the fund will need to be rebranded over the coming weeks. If you saw the most recent filing, you’ll find the new name of the fund will be the Private Shares Fund, and much more information on branding updates will be forthcoming.

So, with that now being covered, Christian, back to you for an overview of the fund strategy and key benefits.

CHRISTIAN MUNAFO: Great, thanks, Kevin.

KEVIN MOSS: Yep.

CHRISTIAN MUNAFO: So, for those of you who may joining us today who may be less familiar with the SharesPost 100 Fund, we wanted to provide a brief overview of the underlying strategy. So, let’s start there and then we’ll move forward with some market perspectives.

Quite simply, this fund is focused on a very significant trend that’s been growing over the past couple decades, which is quite simply that the number of publicly traded companies listed on U.S. exchanges has contracted significantly over this time period as private venture-backed and growth-oriented companies continue staying private for longer. The data on this slide quite clearly tells this story where there has been a greater than 50 percent reduction in those publicly listed companies over this time period.

This is largely attributed to three main drivers, which we list on this slide. First, as many of you know, regulatory changes have made it more challenging and administratively burdensome for companies to go public. So, there is often a desire to stay private for longer. Now, we’ll touch on recent developments that have made it easier for companies to go public like SPACs or special purpose acquisition companies, as well as DPOs or direct private offerings. But this is a more recent trend.

Second, growth-oriented companies are often still developing their business models, which means it might at times be necessary to make operational and/or financial adjustments, which, if implemented as a publicly traded company could result in high volatility, which is certainly not ideal to do in the public market forum.

And, third, and perhaps most important, there has been a significant amount of capital made available to the private markets over the last decade alone. Roughly, 6 trillion across the entire private asset class, of which over one trillion has gone directly into the venture and growth stage assets, which essentially provides these companies with more runway to continue staying private.

And here we can see some of the data behind these private tech company trends. So, if we look back to 1999, the typical venture-backed company took roughly four years from inception to go public, whereas that time period has more than tripled to 12-plus years when we look at data as of last year, 2020.

Perhaps even more significant is the fact that the value appreciation that’s taking place during this protracted life cycle of these companies in the private market has increased nearly 800 percent when we compare those two time periods. We could think of companies like Microsoft, Oracle, Apple and google, even Amazon that went public at valuations far less than we see companies coming out at today. And so for those companies, most of their value appreciation has occurred while they have been public, which means that practically all investors should have been able to access that growth.

However, in today’s environment, by the time we’re seeing private tech companies go public at these higher valuations reported on this slide, because the underlying businesses are fundamentally larger operating businesses, a lot of the growth has already been missed by the average public market investor, who typically does not have the appropriate accreditation requirements or minimum investment sizes to access private funds or private assets. And there still is no universal exchange that exists today to easily buy company securities that are private like we have with our public exchanges. And, further, the vast majority of private venture-backed and growth companies, they never actually become publicly available but, instead, get acquired while they’re still private.

And, lastly, it’s worth noting that shareholders in these private companies that are staying private for longer, often have different investment timelines. So, you think about a company that may be ten-plus years old, an early investor or employee may not have the same tolerance for that duration than others do. And so, while the value of these companies may be appreciating, this extended life cycle and holding period often creates friction and motivation for liquidity. And, again, since there’s no exchange for these types of securities to easily be purchased, it creates asymmetric information and inefficiency, which allow more sophisticated investors to secure attractive entry points into these late-stage, growth-oriented assets.

So, not surprisingly, when we think about these trends I’m talking about, we’ve seen a surge in the numbers of private companies. And just as an example, here we’re showing how many of these late-stage private growth companies are now valued at greater than one billion, which is a milestone many of you now are familiar with, which has turned unicorn. And since this fund was formed in 2014, we could see the number of these unicorns has grown dramatically from 40 to nearly 600. And what means is that the addressable market opportunity for this fund has also grown dramatically, looking just solely at these unicorns.

It is important, thought, to be clear that while our investment strategy is certainly focused on seeking positions in these billion dollar-plus private companies, we also look at companies that we believe are on a trajectory to hit that level of scale.  And so there are companies we’ll invest in that have not yet hit the billion-dollar valuation but we think are on path to do that based on our diligence and pattern recognition. And so when you factor that into the equation, the actual universe is even larger for our fund.

Kevin’s going to walk through our portfolio shortly but here are just some examples to visualize of the digital transformation trends involving various applications of both technology and innovation that are being driven by the private market. Now, these trends were well under way pre-COVID-19 and will continue in the post-pandemic, but there is no doubt that the pandemic accelerated market adoption, penetration, and as a result, the growth of many of these areas. And we are pleased that our fund, and you our shareholders, have benefitted directly as a result.

So, when we summarize, again, the strategy of this fund, what we just talked about essentially is this: Is that this fund is designed to serve as an access point for private innovation trends. And, as Kevin touched on, we will be doing a rebranding of this fund in connection with the investment advisor transition to Liberty Street and this will be part of a theme that you will see – this ability to access these private technology and innovation trends.

Kevin, I’m going to turn it over to you to go over the following slide, which, again, summarizes more specificity on the fund.

KEVIN MOSS: Yeah, thanks, Christian. And I know many of you are familiar with this, but for the benefit of those investors on the call that are currently hearing about the fund for the first time, I can outline the key benefits.

In short, the SharesPost 100 Fund is an SEC-registered ’40 Act fund using the interval structure that allows us to democratize this access to this asset class, specifically late-stage, high-growth innovation companies, but most importantly, for all investors, which is quite disruptive as private market strategies like this have historically only been available to institutional investors like pension funds, endowments, family offices, high network investors, etc. The interval structure – we essentially have removed the typical accreditation requirements that come with private market products. The interval structure allows for up to 5 percent of the fund NAV to be redeemed on a quarterly basis, which can be a very helpful liquidity management tool for investors, especially for financial advisors looking for flexibility in managing their clients’ portfolios.

Given that this is a ’40 Act structure, investors can simply invest the fund with a ticker that’s available on most brokerage platforms like TD, Schwab, Fidelity, Pershing and others. Our fund has been around for over seven years and we have a highly experienced team that’s been investing in this asset class for several decades in aggregate, and we follow a rigorous institutional -grade investment process.

As most of you know, we have a well-diversified portfolio of 66 companies representing numerous innovation-oriented sectors, and we try to target companies later in their development, as Christian mentioned, where we believe an exit can occur, somewhere between two to four years. When the companies do exit, we invest those proceeds back into new opportunities and, of course, we receive inflows from our investors daily. We are continuously trying not only to increase positions in companies we already know and think highly of, but also further diversifying into new companies.

So, that was a fairly high-level overview but I hope I was able to capture the key benefits and what we’re really trying to do with this fund. Christian, back to you.

CHRISTIAN MUNAFO: Perfect. Thanks, Kevin. As Kevin said, you know, we’d be happy to discuss the fund and strategy at a more granular level offline and, hopefully, this was a helpful introduction to those of you who may be less familiar with us. And for those of you who are familiar, thank you for your patience in letting us get through that.

So, let’s go ahead and move on to our current market perspectives. This is a list of the topics that we’re going to try to cover in as efficient of a manner as possible. So, why don’t we go ahead and begin with volatility. So, we’ve been quite please, as stated, that the infection rates are certainly down substantially from the peak levels of COVID-19, about a year ago at this time. And having more FDA-cleared vaccines now available is also comforting. Improvements have clearly been made with the vaccine rollout, there are more vaccines available. So, all of this is providing overall better visibility on the path forward.

That said, and I’m stating the obvious here, this is clearly a very dangerous virus that continues mutating. And so we are certainly not out of the words. But clearly there has been an improving market sentiment around the pandemic, and we’ve been seeing a shift within the public markets towards the reopening trades, including areas like travel, leisure, restaurants, gaming, which we all knew was just a matter of time. We’ve also continued to see very strong earnings throughout the quarter, throughout the market in different sectors. And, obviously, the recent stimulus, $1.9 trillion stimulus plan seems to have been well-received. 

All that said, in parallel, we’ve been seeing rising interest rates clearly creating some spikes in volatility as – you know, what we can call this historical tug-of-war of sorts between value and growth investing is leading to active rebalancing. It’s historically been true that growth versus value does run in cycles. You know, as many of us know, growth has been trouncing value probably since the 2009 time period, so perhaps it is time for a bit of a shift. But while this shift from growth to value at a macro level may create some short-term market pain in this rising interest rate environment, particularly for certain valuations that have been stretched, we continue to believe that high-caliber technology and innovation-driven companies will continue performing well both in the public and private arenas. 

And, as we’ll show momentarily in a few slides, investing in U.S. venture-backed companies while they are in the private market can generate significantly higher returns compared to waiting to access them at what are often much higher valuations in the public market. And so to say it differently, the data that we’re going to show again we believe further validates the case for accessing tech and innovation in the private markets, particularly for investors who have some concerns around public market valuations for similar types of businesses.

When we look at late-stage investment activity, right, which is primarily what this fund focuses on, it goes without saying again that COVID-19 has had and will certainly continue to have an impact on this private market ecosystem for some time. However, we can say with confidence that the late stage venture capital market in particular has been quite resilient throughout. And we have now seen COVID-19 a year in clearly propel technology adoptions and innovation adoption ranging from things like telehealth to e-commerce, to cybersecurity, to distance learning and everything in between.

In terms of overall investment activity, 2020, as we can see here, set a record for late-stage venture capital investment volume. And it’s, again, important to point out that there was essentially a shutdown in activity during March and April of last year due to the onset of the pandemic. And so, despite that shutdown for two months, we still set a record in 2020. While the magnitude of the investment in late stage deals in particular has certainly grown over the last several years, this segment of the VC market has been growing consistently over the last decade – and, again, that’s shown by the data here – for three main reasons, some of which we’ve already covered. So, one, companies are staying private for longer. So, they’re growing into larger businesses and then attracting larger investments. There has been a divergence trend we’ve been seeing where investors in the asset class have been allocating a capital away from much earlier stage companies to later stage companies because they essentially view them as being more risky. And so, there’s somewhat of a level of comfort investing in later stage companies, even though that comes at a higher valuation, than going in much earlier stage companies which comes with more risk.

And, finally, a desire for investors to concentrate on their perceived winners. So, if you’re an investor in a company that’s later stage, that’s performing well, you know, we’re seeing behavior that those investors are willing to put much more money into those businesses versus other investments they hold in their portfolios.

In terms of the valuations, we continue to believe that there should not be a material impact from here. Obviously, there are going to be some companies that experience valuation pullbacks where valuations became stretched. We’ll see that in future rounds of financings or even exits, particularly if those companies are unable to sustain growth rates and operating margins. But, again, we have to point out that there is significant dry powder that’s continuing to chase high-caliber growth and innovation both in the private markets, and as we’ll talk about momentary, for public market-oriented investors as well.

Much of this is evidenced in terms of the new rounds. So, when we look at new rounds of these late-stage private companies, most of these companies are raising money at or above prior round valuations. And this continues into 2021. Kevin will actually walk through some examples of relevant data as it pertains specifically to our portfolio where that trend continues to be relevant as well.

And as we discussed before, just real quickly, we have to remember that private companies tend to involve far less short-term volatility compared to publicly traded companies, which we know are subject to rapid price changes and market forces that may not actually reflect the underlying company financials. That’s not to imply that private companies themselves are immune to risks that public companies face, but they are certainly more insulated from what we can call short-term idiosyncratic-type market volatility.

In terms of exit data, clearly we had a surge in 2020, again, despite also what we experienced in March and April, which is not only a standstill in new investing but also in exits. So, despite that, we’re still looking at levels we haven’t seen particularly in the public arena since 2014. Just to be balanced, again – private companies that may not have very robust business models and strong balance sheets, then can obviously get negatively impacted in any environment, particularly if we have an environment that may be retracting a bit. But for companies that are better situated with strong operating models, with large addressable markets and healthy balance sheets, we continue to see strong support from the market, especially the IPO market. And obviously with special purpose acquisition companies, which we’ll touch on shortly.

I just want to be clear. The source that we use for this graphic, so the source data – the source includes SPACs in their M&A data. So, if we were to just move the SPAC data into the IPOs, I think that would probably tell a clearer story into the public market activity.

So, overall, we remain optimistic about the current exit environment. There’s been no shortage of public offerings, both IPOs, SPACs and also direct listings, which again we’ll cover, just in the first couple months of 2021. And this includes positions held by the fund, which, again, Kevin will touch on shortly.

Okay, so SPACs – we showed this data during our last webinar. Again, for those of you not familiar, a SPAC is a special purpose acquisition company, which is also often referred to in the market as a blank check company. The purpose of this is essentially to serve as a shell with no operations that is taken public with the intent of acquiring or merging with an operating company, and it utilizes the proceeds that are raised through that SPAC offering to consummate that merger or acquisition.

We saw a significant surge of activity in 2020. Just looking at this data here, roughly 250 SPACs being raised representing more than 80 billion in proceeds. Now, for those of you who have been in the market for a while, this is not the first time we’ve seen SPACs. They have, though, come quite a long way in terms of how they’re structured and the underlying economics which continue to evolve. There’s also been much more active utilization of PIPEs alongside these structures, as well as sidecars.

Like anything else, SPACs are not perfect, but what we’ve been seeing is they can potentially be a more efficient timely way for companies to establish a publicly traded currency. And, in some cases, what we’re seeing is that SPACs and PIPEs are essentially pulling forward what would normally be the exit timing of certain late-stage venture-backed companies that without those SPACs or PIPEs, they may have otherwise stayed private and raised additional capital through pre-IPO financings.

So, net-net, we’re obviously monitoring this development quite significantly. We’re happy to have more options for our underlying portfolio companies to get liquid. We’re actively looking for ways to continue to stay active. But most companies that we have in our portfolio, quite frankly, are considering IPOs, SPACs and direct private offerings, DPOs, as they’re now thinking through their entrance to the public market. Clearly not all of these are going to do well. One can argue that some of these companies that are taken public through SPACs may not have gone through as rigorous as a process. We’re going to see that play out, whether or not that’s true, over the coming quarters.

So, that’s 2020 SPAC activity. Just looking at year to date 2021 – and, again, the data here on this slide essentially just shows the first two months of the year. If we were to include March data through today, what we’d basically see is that we’ve already raised roughly the same amount of capital in the first three months of 2021 than we did for all of 2020, which, again, is quite hard to believe.

It’s difficult for us to speculate on whether this momentum is going to continue. And as I was saying moments ago, it’s probably reasonable to assume that this activity will slow and not all of these underlying deals are going to work out. Again, it takes two years – or, it doesn’t take two years; these SPACs have two years to go execute on their target acquisitions, so it may be some time until we see how this plays out. But we can say with confidence that there does not appear year to be an end in sight, despite the shift that we’re seeing in how these SPACs are trading both once they’re listed and then also post-announcement of finding their SPAC partners.

So, finally, before I turn things over to Kevin, this is the data I was referring to earlier. And I think many of you by this point have seen this data. We originally published it through a blog post last summer and updated the data through yearend. What this essentially shows is that investors who are able to access these late-stage venture-backed companies while they’re still private can potentially generate significantly higher returns compared to waiting to invest in them in the public market.

Now, to simplify the analysis, what we essentially just used was the last private valuation these companies raised money at while they were still private. Now, the reality is, as a firm who executes secondary investments as well as primary investments, we are often able to get prices that are lower than those valuations, which could potentially make these numbers actually look better, but for the purposes of this analysis we just used that last round private valuation as the basis. And, again, you can see the numbers speak volumes.

It is important to point out that the environment we are in can provide attractive pricing opportunities for a number of these late-stage companies and we’ve been extremely active in terms of origination and due diligence while also continuing to be extremely disciplined. We also see a flight to quality, as I was referring to earlier, where investors are doubling and tripling down on their best investments and driving valuations in some situations up. And this is where we continue to believe that discipline comes in – because we are not in the business of overpaying for assets.

So to summarize, overall we’re quite pleased but not surprised with how resilient the late-stage venture-backed ecosystem has performed during this very challenging period. There continues to be significant capital investment in the asset class, and the ongoing increase in exit activity continues to be encouraging.

So, I hope that was helpful. With that, I’m going to turn it back over to Kevin to provide a fund level update. And he’s also going to discuss how some of these market trends I just touched on regarding valuations, investment activity and exits are also quite relevant with our portfolio. So, Kevin, with that, I’m going to kick it back to you.

KEVIN MOSS: Great. Thank you, again, Christian. And we do have a lot of information here. I’m going to try to go through it hopefully not too quickly with the time we have. But for a fund update, let’s take a quick look at 2020 because that was really an incredibly uncertain year for everyone. I think we were very fortunate that it ended up being a successful year for the fund. But as you can see here, we added 15 new companies to the portfolio, which we’ll identify on the next slide; we deployed $35 million into these companies; we had six exits, which consisted of fully realized and partially realized exits; we generate $12.7 million from these exits. And we want to point out the big surprise, as we’ve talked about in the past last year, was that many companies raised capital in a period of extreme uncertainty. And not only did they raise money, but in most cases, raised capital at higher valuations. We ended up having 32 companies in the portfolio raise capital last year with only one company raising money at a lower valuation than the previous round of funding.

The next slide, if you could, Christian. Yeah, so we won’t spend a ton of time on this but we just wanted to point out the companies we added. And just to highlight a few companies, Axiom Space, which I’ll talk about in a minute, is another company that we’ve added to the portfolio, which is a play on the space economy. Course Hero, we wanted to continue to add education technology companies, given how well they did last year and I think it’s a trend that’s here to stay. Darktrace and Exabeam are two cybersecurity companies that we added. We want to continue to add to that space. Trax, which is digital inventory tracking, which did very well during the pandemic.

So, these are some of the companies. And we want to remind everybody, if you want additional information on these companies and what they do, please reach out to us directly on that.

So, let’s take a look at where we are so far this year. It’s actually been a really busy – you can’t tell quite from this slide just yet, but we’ll get into this a little bit more – but we’ve added two companies in the portfolio thus far, and we have another two which you will see enter the portfolio before the end of the month. We’ve deployed 13 million into these two companies. We’ve had three exits so far this year, but we’re making sales on companies both public and private. And I’ll touch on that in the next couple of slides. And we’ve generated about $15.6 million in company exit proceeds thus far. And, finally, the capital raising environment continues to remain strong with our own portfolio companies having eight new rounds of financings.

These are the two new companies we’ve added this far this year: Betterment and Crossover Health. Betterment was actually a very difficult company to get into. As we talked about before, sometimes it takes quite some time to get into these companies. It actually took about four months to close this transaction. It’s one of the largest, vastly run automated investing services. It helps people manage, protect and grow their wealth using smart technology. They have more than 100,000 customers and over $2.6 billion under management. And so we’re really excited about this investment.

Crossover, we saw this as another opportunity to invest in digital health, very similar to our investment in One Medical last year that had exited. It targets Fortune 500 companies and provides a variety of health services to their employees, both in person and virtually. And when looking at their public comps, we think we actually had very good entry point in this name. So, not only does the actual space get us pretty excited but we also think the valuation at which we made our investment was very compelling. So, stay tuned for this one.

Now, taking a look at the financings we had so far this year, we’ve had eight companies raise capital. Of those companies, six have raised money at higher valuations and two have raised capital at flat rounds, and so far no companies have had to raise capital at lower valuations. And just taking a quick look at these companies on the next slide – these are some highlights. And, of course, you’ve got to point out SpaceX. This company, as many of you know, has raised multiple billions of dollars to finance their growth and the typically raise capital two times a year. This last year was $850 million, and a $74 billion valuation up from a $46 billion valuation. I know that’s kind of an eye-popping number but we feel like there are few companies worth 10-billion plus, given what we do, and I think SpaceX is really one of those types of companies. If they follow the same pattern as they have in the last few years, you can expect them to raise capital again towards the end of the year.

And keeping to the space theme, Axiom Space has raised capital at a very attractive valuation but, thus far, it’s been undisclosed to the public. And I really want to point out that this is one of our most interesting investments. This company has a license for the International Space Station and has been contracted to build a new station. So, think of them as like the gatekeeper of the new station. And they can monetize this accordingly with companies, governments, very wealthy people looking to take trips up to the station for research and general space travel. So, we’re very excited about that company.

Blend Labs had a nice jump in valuation from 1.67 billion to 3.3 billion and they continue to outperform as well in the fin tech space. And Robinhood, while controversial, raised $3.4 billion at an undisclosed valuation but, nonetheless, the updates from the company we’ve been getting are very positive, so we’re actually pretty excited to see where that goes. And so, needless to say, I won’t go through all of these but companies continue to raise capital and valuations are strong. 

We’ve had three companies which have begun to liquidate in both the public and private space. Palantir, which we’ve talked about on past webinars, has now been public since September, but the majority of the lockup has recently just come off and we began selling this in the private space and then again in the public space, where it’s performed extremely well. It’s helped really drive some of our returns. We’ve realized about $14.2 million so far from our sales, and well exit the balance of the position opportunistically in the next few weeks.

Marqeta, we’ve made some small sales in the private markets, primarily just to take advantage of a really incredible run up it’s had. Again, we’re just being opportunistic here. But as you may have read in the news, they have filed confidentially to go public, so we’ll wait and see what kind of valuation this will bring.

Finally, ChargePoint, which has become our largest position, has just come off of lockup so we’re pretty happy about that since it’s such a big position. And we’re very slowly beginning to look to make some sales here. ChargePoint came to the public market via a SPAC with Switchback Energy, and it’s gone as high as 300 percent over the original $10 SPAC pricing. We’re currently sitting on about a 4.5x on this company, so it’s been a very nice driver of returns for our fund.

Let’s take a look at the current fund holdings. As you can see, 66 companies in the portfolio. This is a very diversified portfolio, which helps explain the stability of the NAV.

So, what really has been driving NAV? What’s helped our returns? I’ve already pointed out ChargePoint, the big up-ground in SpaceX, Marqeta’s run up in the secondary market, and those have been big drivers and I think they’ll continue to be. PubMatic went public in December. This is a company we’ve had in the portfolio for quite some time. It’s still in lockup. But digital advertising has found new life after COVID and these companies have been trading at significant premiums. Trade Desk, Magnite, other companies like that have really been performing well in the public markets. And PubMatic has benefited from this, and as a result, we currently have about an 8.5x return on this investment and it’s been really helping drive our recent performance.

SPACs – still waiting to have their exit is SoFi and 23andMe in our portfolio. It still remains to be seen where these end up, but so far they’re trading reasonably well in its SPAC form, especially SoFi. And then other companies driving performance so far this year would be, of course Palantir just really – it’s come off its highs but it really helped drive performance in 2020 and a little bit in 2021 as well, and we are going to be exiting that position to lock in those gains.

And then, of course, we can look to some of the financings we’ve had such as Blend Labs, Robinhood, Axiom Space, which have had higher rounds of financing, which has helped driven returns. So, that’s what’s really been driving these returns.

But what’s coming up? What’s in the pipeline? I think that’s what a lot of people like to hear about. And I think I can comfortably say that we’re having a very busy year so far and we have a lot to look forward to. We have a lot of companies which have either announced publicly intentions of going public or there are articles indicating their intentions to go public, such as Turo, Nextdoor, Trax has come out, Robinhood, of course, there’s been many articles on that. DigitalOcean has actually recently filed their S1, and many of our companies have been approached by SPACs for a public debut but we’ll have to wait and see if it makes sense for them to move forward with that.

So, based on that, just turning quickly to our returns. . Our three-year annualized now stands at 11.62 percent versus the Russell’s 10.25 percent. This year we’ve really gotten off to a good start. Year to date returns sitting, as of yesterday, at 10.64 percent and our one-year return is 30.69 percent. So, we’ve had a really nice start to the year. Our three-year has moved up to 13.9 percent annualized with the Russell at 15.51 and 14.87 percent, respectively. 

An update on the inflows shows that we had a record year in 2020, raising $100 million. Our redemptions ended up being very low towards the end of the year, only having 5.8 million in redemptions in the fourth quarter. And we deployed 35 million on the year in investments and realized 12.7 million in proceeds from the sales of our investments. However, this year we’ve gotten off to a really good start quite quickly actually, raising 62 million so far this year, or 62 percent of our total raised for all of 2020. 

In addition to that, we’ve deployed almost 30 million so far this year in investments and we have about another 10 million, which will be deployed before the end of the month. So, basically, we’ll have deployed $40 million in Q1 of 2020, which is more than all of – in 2021, which is more than all of 2020.

So, I think we’re very pleased so far this year on what we’ve been able to do. We’ve got a lot going on. It’s very exciting for us. And, Christian, back to you for more portfolio analysis and market outlook before we wrap things up.

CHRISTIAN MUNAFO: Great. Thanks, Kevin. Yeah, some very good exciting information in there. So, this is a slide that we’ve shown in the past. It is a different format. We had an issue with the format of the previous version. Essentially, again, what we’re just trying to show you here is the historical construction of the portfolio and deployment of capital and what the current portfolio basically looks like.

So, for the 107 companies that we’ve invested in since inception, roughly 40 percent of these have been realized, which is another way of saying they’ve been exited from the portfolio. And this excludes – so this excludes companies that have recently listed, that Kevin was talking about, through public offerings, you know, IPO, SPACs, etc., where we continue to hold these shares. And some, in some cases, are still under lock up. And what that essentially implies, especially when we look at the amount of capital that’s been deployed over the last several years, is that over 70 percent is fairly young in this portfolio. So, roughly 70 percent has been invested over the last couple years, so we believe that there is significant growth potential for these assets to grow into higher valuations as they move down that path to an exit, whatever that exit may be.

We also have investments that are several years old and more that we think continue to be well-positioned for liquidity. And so, as Kevin said, there are certain things we can share, which we did, and there are certain things we cannot share, which we did not. But we will certainly continue to keep everyone apprised as there are public developments we can share.

This slide just shows the annual deployment since the inception of the fund. So, as Kevin was saying, we’re off to a pretty strong start in 2021. As some of you know, the private market is not one in which you can just press a button on your favorite brokerage exchange and just buy securities instantaneously. These are, in some situations, longer drawn-out negotiations and execution processes which could take up to months to close a single transaction.

So, at any given time when you look at these metrics, they’re not telling the entire story. So, as Kevin was saying, in addition to the 30 million that we’ve already deployed year to date, there’s an additional 10 million we expect to close by the end of this quarter, and there are tens of millions behind that in active deals that we are either in the process of closing that are kind of scheduled to close in the second quarter, or that we’re in the process of performing advanced stages of due diligence on. And we expect many of those to close.

So, again, looking at the current seasoning of the portfolio, of the 160 million that’s been invested over the last few years, which represents about 40 percent of the NAV and roughly 70 percent of total cash since inception, we think we have a fairly young portfolio today which has quite a bit of room to run.

So, with that said, as we look forward, we’re going to continue to actively monitor the existing portfolio. Of course we’re going to maintain our discipline. So, again, we’re trying not to chase particularly what we believe are irrational run-ups in valuation. We’d rather continue to look for value and seek price dislocations, where possible, in high-caliber assets. It’s paramount that we gain appropriate visibility around the balance sheets of these companies as well so we understand what the ability is to tolerate and to finance burn rates, as many of these companies are still very high growth and not focused as much on generating profits as they are focused on scaling. 

And we certainly saw, last year, during the pandemic, in certain situations how having a strong balance sheet is just paramount. We’re keenly aware, given our experience in this space, how sustained volatility can impact both valuations and exit activity. And on that note, we just want to remind everyone that, historically, when we have periods of increased volatility, these tend to be very strong vintage performers, because typically you can get better entry points. And that’s certainly played out in the history of this fund when we look at some of those periods of greater volatility and dislocation.

So, with that – that essentially wraps up the majority of our webinar for today. We wanted to move on to some questions. And so, as we said earlier, there’s a Q&A box available on your screen and we have some questions that have been coming in. We’ll try to get through – there’s quite a bit of them – so we’ll get through as many as we can. And then for those that we don’t, we will certainly be in touch separately offline.

Kevin, before we start on those questions, anything else you wanted to cover before we move on?

KEVIN MOSS: As usual, I just want to, of course, thank everybody for their support. We’ve had some shareholders who’ve been with us for many, many years, some since inception. And we are – can’t help but express our great gratitude for all your support over these years. So, thank you very much.

CHRISTIAN MUNAFO: Great. Thanks, Kevin. So, I’m just trying to go through these questions pretty quickly. We have some questions that are looking for further clarification on SPACs versus IPOs versus direct public offerings. I think we touched on some of that. I’ll do it briefly, Kevin, and then I can kick the next question over to you, if that’s okay.

Look, this is a very popular topic and we’re happy to take it offline as well. We know these things can get a little bit confusing. You know, for SPACs, in particular, again, it’s important to understand that when this shell vehicle is taken public, the managers of that vehicle essentially have two years from the time it goes public to facilitate an acquisition. And so there’s definitely a clear motivation to find their target deal. And sometimes alongside of that blank check company, they will raise private investments. So, they call them public investments and private vehicles – private investments and public vehicles. These PIPE deals that are raised essentially help to further finance both the acquisition and further financing of these vehicles on a go-forward basis.

So, the SPACs, in a sense, have bene utilized as a proxy for traditional IPOs. They, in many situations, can be facilitated more quickly, more time is spent focused on the future projections of the companies historically than IPOs do. And so what you often see is that valuations of SPACs may come out higher than they would have if they went through a traditional IPO process, which tends to focus more on historicals. So, there’s been always this ongoing debate that for these high-tech companies, the traditional IPO process may end up leaving a lot of value on the table. And so there’s been a search by underlying companies and shareholders to try to avoid that. So, SPACs have provided for some of that.

You know, and then we have direct public offerings, which there are also some differences in. In the IPO, the traditional IPO, quite simply, the company creates new shares that are underwritten by an intermediary such as investment bank or an advisor. And then the banker works with that company on the offering process. They go on a roadshow, there’s a formal offering process, and the price is determined based on that, and then the company is essentially made public.

In contrast, the direct offering is quite actually less complicated compared to the IPO. There’s less selling through the intermediaries and it’s actually just selling securities directly to the public without going through a bank.  And there are no new shares offered to the public. So, the issuing company essentially sets the terms itself, such as the offer price, the minimum amount that can be made available for each investor and the maximum numbers of shares that can be issued – well, not issued but sold. And there’s been a development from a regulatory standpoint where direct public offerings can also now raise private capital alongside of them.

So, hopefully, that helps. In net-net, again, these are positive developments, we think, for the ecosystem that give our portfolio more ways to achieve liquidity.

All right, Kevin, there’s a question just for clarification to confirm the various investment advisor platforms that we’re on. Do you want to just walk through them?

KEVIN MOSS: Yeah, sure. We’re on all the major platforms, TD, Schwab, Fidelity, Pershing, some of the smaller platforms as well. We’ve actually had very little issue I can think of in the past three years now of any financial advisor or registered investment advisor that are on any of the larger platforms that had issues getting into our fund. So, we’re really well-diversified in that regard. And we’re working towards getting on – continuing to get on some of the smaller ones. But the major ones we all have a presence in.

CHRISTIAN MUNAFO: Great. Thanks, Kevin. There are some questions around whether or not this presentation will be made available. Certainly we’ll make this available and we’ll post the webinar up on our website once it’s been reviewed by Compliance. And you can feel free to contact your representative and they’ll provide whatever information we’re able to share. We have a lot of materials that we’d be happy to share with you.

There’s a question about what in the portfolio didn’t work or where are stress points? I think, historically, what we’ve learned just both here at the SharesPost 100 Fund and in other prior roles is that we try to avoid areas that are significantly capital-intensive and also areas that are significantly risky and binary. So, you’re not going to see us investing in areas like pharmaceuticals or really heavy biotech, which gets very difficult to perform diligence on and predict. There are also various areas of clean technology, which have proven to be very difficult.

So, we tend to focus – and there have been some issues that we’ve had in the past in certain investments like that. So, we’re tending to focus on companies that have much more predictable business models, less capital-intensive financing requirements, and what we believe is a much clearer path to exit.

Kevin, there’s a question with regards to what is the normal distribution from the fund annually? I know you touched on that last time, but maybe you can just refresh everyone’s memory on that.

KEVIN MOSS: Yeah. So far in the life of the fund, we’ve only made one distribution. That was last year. It was about 2 percent of the fund. So, it was a reasonable distribution. As you all know, we make a distribution on capital appreciation of our investments. So, if we have any losses, we have to eat through that before we actually make a distribution. We will most likely have a distribution this year. It’s a little early to say what that looks like. But as you can see from our portfolio, we are having a lot of exits this year.

CHRISTIAN MUNAFO: Great. Thanks, Kevin. I’ll just take these last two quickly, then I want to wrap up. So, there was one question with regards to are we looking to establish positions in blockchain? The answer is yes, we are looking in this area. We’re also being highly selective and making sure that we have good visibility in terms of what aspect of the blockchain is being focused on. You know, we are looking to avoid, as I said earlier, areas that are less predictable. But there are certain areas that we see greater scale and visibility being generated in, and so we are looking. Some of those more mature assets come at very lofty valuations. And so, again, we’re trying to be disciplined. That is definitely an area that we’re looking at.

And then the final one is just, you know, based on the seasoning of the portfolio, what are the timeline expectations for exits and how does it compare to a typical venture secondary fund? When we said that we have a young portfolio, we mean it’s young in terms of there still is a lot of growth left. But when we make investments, we’re typically investing in what we believe is two to four years to an exit. Sometimes it happens sooner, sometimes it takes longer. But we are typically looking for shorter duration exits.

The point of what we were saying is that we just believe – when we look at the overall seasoning on this portfolio, these companies still have a couple years left, in many situations, of additional growth before they’re going to achieve those exit points. So, that’s why we believe that there’s more exit and growth potential.

So, with that being said, I think we’re going to wrap things up here. We’re very grateful, again, for all of your support and for your time today. We are here to address any additional questions you may have. And I’m going to kick it back over, Kevin, to you to wrap things up.

KEVIN MOSS: Yeah, no, thank you, Christian. And there are a couple questions that we still have to get to so we’re going to follow up with those individuals directly. Again, I just want to say thank you. It’s been a very trying year, I think, for everybody, and we’re going to continue to do our best to make this fund all that it can really be. It’s been a very great experience and a great ride so far. So, here’s to a successful 2021. But thank you, everybody, for your support.

Private Shares Fund

Top 10 Holdings as of 04/26/2021*
Represents 30.90% of Fund holdings as of April 26, 2021. Holdings are subject to change. Not a recommendation to buy, sell, or hold any particular security. To view the Fund’s complete holdings, visit privatesharesfund.com/portfolio.

RISKS AND OTHER DISCLOSURES

AS OF DECEMBER 9TH, 2020, LIBERTY STREET ADVISORS, INC. REPLACED SP INVESTMENTS MANAGEMENT, LLC (“SPIM”) AS THE ADVISER TO THE FUND. AS OF APRIL 30, 2021, THE FUND CHANGED ITS NAME FROM THE “SHARESPOST 100 FUND” TO “THE PRIVATE SHARES FUND.” THE FUND’S PORTFOLIO MANAGERS HAVE NOT CHANGED. Investors should consider the investment objectives, risks, charges and expenses carefully before investing. For a prospectus with this and other information about The Private Shares Fund (the "Fund"), please download here. Read the prospectus carefully before investing.

Investment in the Fund involves substantial risk. 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 shares other than through the Fund's repurchase policy regardless of how the Fund performs. The Fund does not intend to list its shares on any exchange and does not expect a secondary market to develop.

All investing involves risk including the possible loss of principal. Shares in the Fund are highly illiquid, and can be sold by shareholders only in the quarterly repurchase program of the Fund. Due to transfer restrictions and the illiquid nature of the Fund’s investments, you may not be able to sell your shares when, or in the amount that, you desire. 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. Because most of the securities in which the Fund invests are not publicly traded, the Fund’s investments will be valued by Liberty Street Advisors, Inc. (the “Investment Adviser”) pursuant to fair valuation procedures and methodologies adopted by the Board of Trustees. While the Fund and the Investment Adviser will use good faith efforts to determine the fair value of the Fund’s securities, value will be based on the parameters set forth by the prospectus. As a consequence, the value of the securities, and therefore the Fund’s Net Asset Value (NAV), may vary. There are significant potential risks associated with investing in venture capital and private equity-backed companies with complex capital structures. The Fund focuses its investments in a limited number of securities, which could subject it to greater risk than that of a larger, more varied portfolio. There is a greater focus in technology securities that could adversely affect the Fund’s performance. The Fund is a “non-diversified” investment company, and as such, the Fund may invest a greater percentage of its assets in the securities of a single issuer than investment companies that are “diversified.” The Fund’s quarterly repurchase policy may require the Fund to liquidate portfolio holdings earlier than the Investment Adviser would otherwise do so and may also result in an increase in the Fund’s expense ratio. This is not a complete enumeration of the Fund’s risks. Please read the Fund prospectus for other risk factors related to the Fund.

Companies that may be referenced on this website are privately-held companies. Shares of these privately-held companies do not trade on any national securities exchange, and there is no guarantee that the shares of these companies will ever be traded on any national securities exchange.

The views expressed in this material reflect those of the Fund’s Advisor as of the date this is written and may not reflect its views on the date this material is first published or anytime thereafter. These views are intended to assist shareholders in understanding the Fund’s investment methodology and do not constitute investment advice. This material may contain discussions about investments that may or may not be held by the Fund. All current and future holdings are subject to risk and to change.

Distributed by Foreside Fund Services, LLC. www.foreside.com.

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