Pre-IPO Investing Through Mutual Funds
I've been reading in the news lately that a few mutual fund companies like Vanguard, T. Rowe Price Group, and Principal have been marking down their investments in Uber Technologies Inc.
The markdown is relative to the $48.77 price at which Uber sold shares to investors in the 4th quarter of 2015.
While that is a certainly a reflection of Uber's recent woes, I hadn't realized that one could actually invest in a pre-IPO company through the big mutual fund providers. So I decided to dig a little deeper to find out which funds offer this - specifically the institution I use: Fidelity.
Reviewing the monthly prospectus of the Fidelity Contrafund (FCNTX) as of 7/30/2017, I was able to get a sense of the full holdings of the "unicorns" and startups, which I have listed at the bottom of this page.
To summarize, there are quite a few names that are very familiar here, including Pinterest, WeWork, Uber, Dropbox, Airbnb, and SpaceX. As you can see below, a few of these names repeat themselves (like Dropbox and Airbnb), so you'll have a bit more exposure. This fund seems like a pretty good way to get some exposure to these startups without the risk of a direct investment, since the total investment is around 1% of the fund. If these companies go public, you can bet that % of net assets will go up.
Fidelity Growth Company Fund (FDGRX) also gives investors exposures to Uber, Dropbox, Spacex, and other startups including YourPeople Inc (doing business as Zenefits) and Roku, but at the time of this writing, the fund was closed to new investors.
Fidelity Blue Chip Growth Fund (FBGRX) is another fund with exposure to pre-IPO companies, with a list of holdings below. This fund has greater exposure to Uber and SpaceX than Fidelity's Contrafund plus additional exposure to a few other private companies like The Honest Company, MOD Super Fast Pizza Holdings, YourPeople (doing business as Zenefits), Blue Bottle Coffee, and PAX Labs (the company behind Juul e-cigarettes).
Another Fidelity fund - Fidelity Growth Company Fund (FDGRX) - also gives investors exposure to Uber, Dropbox, Spacex, YourPeople Inc, and Roku, but at the time of this writing, the fund was closed to new investors.
So the good news is, if you're a small time investor without connections like myself, you can still get a piece of the action. But is it worth it?
Looking at the returns here, it seems like the out-performance could be worth the additional risk. I don't personally own any of either FCNTX or FBGRX at the moment, but will probably invest in one or both eventually.
