What does liquidity look like? How will redemptions work? – The Cashmere Fund

We have an innovative approach to liquidity that is unique in the venture capital space. Members will be able to request cash out of their investments during two windows per year.

Liquidity is a critically important consideration to weigh with any investment. Venture capital is inherently a highly illiquid asset class, but we have designed our Fund in such a way that we can offer liquidity, albeit with some restrictions, as a benefit to our Members.

Please review the Cashmere Fund Prospectus carefully.

Redemption windows

Twice annually, The Cashmere Fund will open up a redemption window where Members will be able to request some or all of their invested capital.

How the redemption windows will work:

A deadline for each redemption window will be communicated, and Members who need to make a redemption request should submit ahead of that deadline.
Redemptions will be capped at a maximum of 5% of the Fund's net assets. After the deadline passes, we will aggregate all of the requests submitted by Members during that redemption window and determine how much of each request can be redeemed.
- If the aggregate of all redemption requests submitted ahead of the deadline for that window is less than 5% of the Fund's net assets, Members will receive 100% of their request.
- If, on the other hand, aggregate redemption requests exceed 5% of the Fund's net assets, Members' requests will be reduced on a pro-rata basis (but they would be welcome to submit a new request during the next window and there are no penalties for submitting multiple redemption requests).

Early redemption fee (applicable to redemptions of shares held 18 months or less)

All Members are subject to an early redemption fee that would apply to any redemption made in the first 18 months. It scales down over time, so within the first 6 months it would be 2%, then it goes down to 1.5% within the first 12 months, 0.5% within the first 18 months, and no longer applies to redemptions on funds held longer than 18 months.

Long time horizon

It's worth highlighting that our Members should be thinking about their investment in The Cashmere Fund as a long-term investment, in the range of 7-15 years, in order to see the greatest potential benefit. That's more just the nature of VC than a feature of our Fund.

Individuals who know now that they will need access to a certain amount of capital for a certain purpose within a certain timeframe less than 15 years away may want to reconsider the amount they are considering investing. For instance, The Cashmere Fund would not be an appropriate investment for emergency savings for anyone.

Taxes

Be aware that requesting and receiving a redemption of your investment may trigger a tax liability. Please consult with your CPA to gain an understanding of what this may mean for your individual tax situation. Our team cannot provide tax advice.

Playing out some scenarios

To help Members plan for their liquidity needs, it could be helpful to look at a hypothetical scenario.

Hypothetical Scenario - Joanne's Investment Journey with The Cashmere Fund

June 2022: Initial Investment
Joanne Smith invests $10,000 in a fully liquid money market account for short-term liquidity needs and another $10,000 with The Cashmere Fund for long-term growth.

January 2023: First Redemption Request
A few months later, Joanne needs $1,000 for home improvements. She requests a redemption of $1,000 from her investment. The Cashmere Fund has $20,000,000 in net assets and Members submit $2,000,000 in aggregate redemptions. Because the total redemptions are 10% of the Fund's net assets (double the 5% cap), all Members receive half of their requested amounts (their pro-rata share of the maximum amount the Fund can redeem), so Joanne looks for another source of funds for the other $500 she needs for her home improvement project.

5 Years Later - Medical Emergency
In a medical emergency, Joanne needs $2,000 for bills. She requests $4,000 during the next redemption window to be safe. By this time The Cashmere Fund has grown in size to $60,000,000 in net assets, and during this redemption window, Members submit $1,500,000 in aggregate redemptions. Aggregate redemptions are only 2.5% of the Fund's net assets (below the 5% cap), so Joanne receives 100% of her requested amount. She receives more than she needs for medical bills and reinvests $1,500 back into her account, keeping $500 for tax responsibilities after speaking with her CPA.

Over the Next 10 Years
Joanne lets her investment grow, reinvesting distributions from the Fund.

Nearing Retirement - Liquidation Requests
As retirement approaches, Joanne decides to liquidate her investment. Her first redemption request results in a 20% pro-rata redemption due to high demand for redemptions. She waits six months and tries again, receiving a 90% pro-rata redemption this time. After waiting another six months and submitting a final request, she receives a 100% pro-rata redemption, allowing her to close out her account.

Please note that nothing about the foregoing hypothetical example should be construed as investment advice or tax advice. Any given redemption window may result in pro-rata redemptions anywhere in the range of 0% to 100%, depending on the requests made by Members. The net asset value of the The Cashmere Fund may increase or decrease over time, depending on (i) the valuations of the portfolio companies the Fund has invested in, (ii) the capital contributed by new Members, and (iii) the capital redeemed by existing Members during redemption windows.

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