The valuation dynamics surrounding the Fundrise Innovation Fund (VCX) invite scrutiny, particularly in light of the performance trends observed in Pershing Square Holdings (PSH), a fund led by investor Bill Ackman that trades on the London Stock Exchange. PSH currently operates at roughly a 25% discount to its net asset value (NAV), a figure that has fluctuated from a low of 9% at its inception in 2014 to a peak of 40% in 2022.
The persistent discount reflects a combination of factors. PSH’s focus on public equities—where investors can replicate the portfolio themselves—alongside its closed-end structure and European listing limits the investor base and arbitrage opportunities. Furthermore, its fee structure, which includes a 1.5% management fee and a 16% performance fee, can deter potential investors who demand a discount for perceived risks, particularly in light of recent underperformance against the S&P 500.
In contrast, the VCX aims to capitalize on private assets with limited accessibility that could warrant a premium rather than a discount. Unlike PSH, VCX plans to list on the larger New York Stock Exchange, potentially enhancing liquidity and attracting a broader spectrum of investors. Additionally, VCX’s fee structure appears more favorable, with a lower management fee and no performance fee, making it more appealing.
Given these distinctions, it is unlikely that VCX will experience a discount comparable to that of PSH. Both funds serve different market categories, and VCX’s strategic advantages may position it to perform favorably, especially as it approaches its listing.
Why this story matters
- Insights into NAV trading dynamics can guide investment strategies in emerging funds.
Key takeaway
- VCX’s unique market positioning and fee structure may prevent it from encountering a discount similar to that of PSH.
Opposing viewpoint
- Skeptics argue that high demand for private assets may not guarantee superior performance compared to public equity investments.
