If I told you that I could get you into Anthropic, OpenAI, SpaceX, and Anduril today, right now, before any of them ring the bell at the New York Stock Exchange, would you be interested? Of course you would.
Anyone with a pulse and a brokerage account would be. These are four of the most-discussed private companies on planet Earth. SpaceX is hauling NASA astronauts and reshaping global communications. Anthropic and OpenAI are racing each other to build the most powerful artificial intelligence in human history. Anduril is quietly becoming one of the most important names in modern defense, with autonomous systems that have changed the way we think about military hardware. And if you haven’t asked yourself, “How do I get a piece of that before it’s too late?”, well, just assume your neighbor has.
But for decades, the answer has been some version of “you can’t.” Access to late-stage venture capital has been gated by accredited investor rules, ten-figure check sizes, and personal relationships that the average Joe doesn’t have. The whole structure exists precisely because the upside is so enormous, and Wall Street doesn’t generally hand out that kind of upside to retail investors without a fight.
So when someone tells you that you can buy these companies today through a single ticker on the New York Stock Exchange, with no accreditation required, your first reaction would naturally be excitement. Your second reaction, though, is what just might save you.
Welcome to the Innovation Fund
The product in question is the Fundrise Innovation Fund (discussed briefly last week), which trades under the ticker VCX. It was listed publicly back in March, and the pitch is exactly as advertised. You buy shares of VCX, and VCX owns stakes in roughly two dozen of the most coveted private companies in the world. The top three holdings, Anthropic, Databricks, and OpenAI, account for nearly half the portfolio. Round out the list with SpaceX, Anduril, and Ramp, and you’ve essentially got a greatest-hits album of late-stage tech.
For a long time, this kind of exposure was a fantasy for the average investor. Now it’s a tap on your phone. But before you tap, we need to talk about the wrapper. Because VCX is not an ETF, and that distinction matters more than almost anything else about the product.
The Wrapper Matters
Most investors today buy funds through ETFs (Exchange Traded Funds) without ever thinking about the plumbing underneath. However, the plumbing is key, and it’s worth a brief detour.
When an ETF starts trading at a price that drifts above the value of its underlying holdings, a class of professional traders called Authorized Participants steps in. They buy the underlying stocks, hand them over to the fund company, and receive newly issued ETF shares in exchange. They then sell those new shares into the market, pocketing the difference. The new supply of shares pushes the ETF price back down toward the value of what it actually owns. The same thing happens in reverse if the ETF trades too cheaply. APs scoop up the discounted shares, redeem them for the underlying stocks, and sell those stocks for a tidy profit.
It’s an elegant, self-correcting feedback loop. And it’s why your S&P 500 ETF almost never trades at a meaningful premium or discount to what’s inside it. The market price and the underlying value stay glued together because someone is always being paid to keep them glued (a.k.a., arbitrage).
A closed-end fund, or CEF, lacks this mechanism. A CEF, by definition, issues a fixed number of shares at launch, and that’s the whole supply. Forever. No creation, no redemption, no arbitrage. Once those shares hit the open market, the price is set entirely by what someone is willing to pay and what someone else is willing to sell for. The value of the underlying holdings has nothing to do with it.
This is fine when there’s plenty of supply and reasonable demand. CEFs that hold boring stuff like municipal bonds tend to trade within a few percentage points of their underlying value. Sometimes at a small discount, sometimes at a small premium, but rarely anything wild.
Now imagine a closed-end fund that holds the most exciting private companies in the world, with only 28 million shares outstanding, where a chunk of those shares are locked up and can’t even be sold until September. Imagine retail investors lining up to buy because they finally have access to the names they read about in the Wall Street Journal every morning.
What do you think happens to the price?
The Math That (Should) Stop You
The technical term for what a fund is actually worth, on a per-share basis, is Net Asset Value, or NAV. You take the value of everything the fund owns, subtract liabilities, and divide by shares outstanding. Simple.
VCX self-reported a NAV of around $18 per share earlier this year, based on the most recent valuations of its private holdings. So if you owned one share of VCX, you owned roughly $18 worth of Anthropic, OpenAI, SpaceX, etc, fair enough. Now, hold on to your hats, though. One single share traded above $250 in late March.
Let that sink in. Investors were paying more than fourteen times the assessed value of the underlying assets. The fund itself was worth eighteen bucks, and people were happily forking over hundreds. It’s the financial equivalent of paying $700 for a $50 gift card because the store is fashionable.
The implication of that math, if you carry it through, is genuinely absurd. At those prices, VCX’s stake in Anthropic implied that Anthropic alone was worth roughly $5 trillion. Its stake in OpenAI implied a valuation of more than $12 trillion. The combined implied value of just the top three holdings exceeded the combined market capitalization of Nvidia, Apple, Alphabet, Microsoft, Amazon, and TSMC. You don’t need an advanced degree to know that math doesn’t work out.
A Tale As Old As…Last Year
If you think this story sounds familiar, that’s because we lived through a near-identical version of it not long ago. Back in November, in a quick aside about “going back to school”, I mentioned a fund called the Destiny Tech 100, ticker DXYZ. Same general idea: a closed-end fund that gave retail investors public-market access to private tech companies. SpaceX was the marquee holding, with smaller stakes in Databricks, OpenAI, xAI, and others.
In late 2024, DXYZ went bananas. The fund’s market price ran to over $70 per share at a moment when its NAV was a hair over $5. That’s not a typo. Investors were again paying roughly 14 times the portfolio’s underlying value.
What happened next is the part everyone needs to internalize. The underlying portfolio of DXYZ did exactly what its holders hoped it would do. SpaceX kept getting more valuable. The other holdings appreciated meaningfully. The NAV roughly quadrupled, from around $5 to nearly $20. But the investors who bought near the top still got destroyed.
Even with the NAV ripping higher, the share price collapsed roughly 57% from its peak. They were right about the thesis. They were right that the private companies in the fund would grow. They were just wrong about the price they paid for that exposure. The premium did all the work, and it did it in the wrong direction.
That is a story worth reading twice. You can be correct on every fundamental question and still lose because you overpaid. The market eventually figures out what something is actually worth, and when it does, the repricing can be rapid.
The Real Lesson
The temptation with a vehicle like VCX is to focus on the names inside it. Anthropic is genuinely extraordinary, and OpenAI may turn out to be equally impressive. SpaceX is rewriting the economics of getting things into orbit. None of that is in dispute, and none of it is the point.
The point is that owning a great business and paying a good price for that business are two completely different decisions. Anyone who lived through the dot-com era can tell you that owning Cisco in 2000 was a perfectly reasonable instinct. Cisco was and still is a great company. It just took roughly 2.5 decades for the stock to recover to the price paid in March of that year.
Knowing what you own is the first piece of the puzzle. Knowing what you paid for it is the second. Both have to be right, and the second one is the one investors consistently get wrong when they’re caught up in the excitement of the first. When something seems too good to be true, the answer is almost never that you won the lottery. The answer is usually that if it seems too good, you probably missed something.
Markets / Economy
- Another strong week turned sour on Friday as no tangible outcomes came from the Trump-Xi summit. The S&P finished the week up 0.1%, the Nasdaq down -0.1%, and the small-cap Russell 2000 down -2.4%.
- CPI accelerated to 3.8% in April, the highest since May 2023, compared to 3.3% in March.
- Core CPI, which excludes food and energy, rose to 2.8% in April from 2.6% in the previous month, slightly above market expectations of 2.7%.
- PPI soared 1.4% MoM in April, the biggest increase since March 2022, following an upwardly revised 0.7% gain in March and well above forecasts of 0.5%.
Stocks
- U.S. equities were in positive territory. Energy and Healthcare were the top performers, while Consumer Discretionary and Real Estate lagged. Growth stocks led value stocks, and large caps beat small caps.
- International equities closed lower for the week. Developed markets fared better than emerging markets.
Bonds
- The 10-year Treasury bond yield increased 21 basis points to 4.59% during the week.
- Global bond markets were in negative territory this week.
- High-yield bonds led for the week, followed by corporate bonds and government bonds.
