Interval Funds

Jun 18. 14:05

Fundrise, LLC Registers the Fundrise Growth Tech Interval Fund

Fundrise, LLC Logo from

Fundrise, LLC, a subsidiary of Rise Companies Corp., registered the Fundrise Growth Tech Interval Fund (the "Fund") on 6/17/21, which will focus on investing in equity securities and derivatives of privately-held, late-stage growth companies across the broader technology sector, including firms in the IT, telecommunications, retail, media, electrical equipment, biotech, and medical tech industries. Fundrise Advisors, LLC will serve as the Fund's investment adviser. 

Under normal circumstances, Fundrise will target U.S.-based, venture-backed firms that have already established product-market fit and sustainable, meaningful revenue generation – and crucially, have not yet made any public offering.

The Fund's prospectus acknowledges the commonly-understood risks associated with betting on a potential IPO or other liquidity event – specifically, the Fund intends to buy call options, equity forward contracts, and other rights to purchase equity securities at a specific price for a specific period of time. These holdings could take years to appreciate, if ever. They will likely be subject to the decisions of majority private shareholders, and could face other constraints like lockup provisions that prevent the Fund from selling securities immediately post-IPO, even if the share price is declining.

However, Fundrise believes this "Buy and Hold" strategy is worth a shot, as investing in pre-IPO firms captures significantly more upside potential than investments in technology companies that are already publicly traded, according to the Fund's prospectus. The adviser refers to the distinction as "private-public valuation arbitrage."

But...what about real estate?

Fundrise launched the Fundrise Real Estate Interval Fund last year, real estate investments still represent their flagship product offerings, and earlier this month the Wall Street Journal reported that Goldman Sachs had provided them with a $300m credit facility to expand their investment products into the single-family rental market. Yesterday CFO Dive reported that Fundrise had hired a new CFO in Alison Staloch, former chief accountant at the SEC's Division of Investment Management – in an interview, she affirmed that Fundrise is maintaining its core focus on commercial and residential rental properties. So how does the Fundrise Growth Tech Interval Fund fit into their broader thesis?

A major part of Fundrise's current value proposition is they offer retail investors access to a diversified portfolio of private real estate assets starting at just a $500 minimum investment, opening a vast market of alternatives that used to be restricted to institutional and otherwise accredited investors.

Similarly, investing in pre-IPO firms has historically been the arena of institutions like private equity and venture capital firms, except in cases where a retail investor actually founded the company, was an early hire, or participated in a friends and family round.

This is beginning to change. SharesPost 100 launched in 2012 to provide institutional investors access to VC-backed, high-growth, pre-IPO equities for a $1m minimum investment, and in 2014 they launched a new share class (PRIVX) providing non-accredited investors access to the fund for a $2500 minimum. However, most of the newer crowdfunding platforms seeking to "democratize" access to pre-IPO investments, such as EquityZen, EquityBee, and OurCrowd still maintain investor accreditation requirements.

Fundrise has apparently recognized an opportunity to compete – while SharesPost 100 totaled just over $405m AUM across all asset classes at the end of Q1 2021 (nearly a decade since inception), Fundrise has invested in over $5b in real estate transactions over the same time period, with over $1b under management for investors.  By leveraging the technology they've built to improve investor engagement and automate compliance for their current offerings, Fundrise seeks to expand retail investor access to the potential upside from investments in private late-stage tech equities, the same way they are expanding access to investments in private real estate assets.

The Fund has not currently listed a target effective date. Stradley Ronon Stevens & Young, LLP serves as the Fund's legal counsel.