I was looking at ways for retail investors to invest in SpaceX before its IPO, and DXYZ (Destiny Tech100 Inc) caught my attention as it was looking very attractive on the surface: providing exposure to many interesting private companies like Anthropic (18.1%), SpaceX (14.5%), OpenAI (5.8%), among others.
After taking a closer look, my views changed completely. DXYZ is not a normal ETF. It is a closed-end fund (CEF). Unlike ETFs, CEFs tend to trade above or below the reported value of their holdings based on "popularity" and scarcity. We might be 100% right that Anthropic, SpaceX, and OpenAI are incredible companies, but we could still lose money buying DXYZ if the ~100% premium it currently trades at collapses, like it has in the past.
But the high premium isn't the only concern:
- Lack of Transparency: Being a CEF that invests in private companies, it does not provide daily portfolio disclosure (like ETFs) and there is very limited visibility into holding value, terms involved, etc. as they involve SPVs, profit participation units, forward contracts, and multi-layer structures.
- Extremely high fees: The 2.5% management fee is only part of the story. Total expenses are much higher with several hidden charges (~4.5% as per Morningstar). This might also be understated, as SPVs tend to carry their own embedded fees which would affect total return.
- Cash Drag: As per the latest filing, over 30% is invested in a money market fund at less than 4% yield. So investors are paying a massive premium for a vehicle with a large cash-like position.
- The scarcity premium may not last forever. If companies like SpaceX or Anthropic eventually go public, investors may no longer be willing to pay such a huge markup just to access them indirectly.
- Highly volatile: Changes in premium lead to large price fluctuations, despite much changes at the holding level. (like the 25% drop yesterday)
My issue is not "private AI/Space is bad." My issue is that DXYZ looks like a complex fund with indirect exposure, high fees, cash drag, transfer-restriction risk, and a very large premium.
Curious if anyone here has looked at alternatives for private market exposure, and what your take is.
Not financial advice.
Why I’m NOT Buying DXYZ: Major Red Flags Most Investors May Be Missing
byu/Clean-Yogurtcloset94 ininvesting
Posted by Clean-Yogurtcloset94
1 Comment
That is the part most people miss. Everyone sees “SpaceX + OpenAI exposure” and the brain goes straight to the upside. But with these structures, sometimes you’re not buying the company. You’re buying layers of wrappers around the company, plus a massive hype premium on top. The premium compression risk is the brutal part. You can be completely right about AI and space long term and still lose money if the premium normalizes. Retail access to private markets is still genuinely messy. Either the structure is opaque, fees quietly eat returns, or the minimums are designed for institutions with a “retail-friendly” label stuck on.
Always worth asking: am I investing in the company, or just paying extra to feel early?