2

For example, I'm invested in FGCKX, which contains SpaceX, Reddit, and Juul equity, and some other companies not publically-traded. How is the day-to-day price determined for these?

For a follow-up question, how did these stocks get into the mutual fund? I can understand that the fund manager might think they're good investments, but how were they able to be purchased?

2

A private placement is an offering of stocks or bonds to mutual funds, large banks, pensions, insurance companies and accredited investors (high net worth people). It's an alternative to an IPO for a company that wants to raise capital. It does not have to be registered with the SEC and therefore has little regulation.

If the company goes public via an IPO, private placement shareholders do quite nicely.

FWIW, here's a story about Facebook and Goldman Sachs.

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As a level 3 asset it can't be marked to market and the value might not change on a daily basis.

Level 3 is the least marked to market of the categories, with asset values based on models and unobservable inputs — assumptions from market participants are used when pricing the asset or liability, given there is no readily available market information on them. Level 3 assets are not actively traded, and their values can only be estimated using a combination of complex market prices, mathematical models and subjective assumptions.

Examples of Level 3 assets include mortgage-backed securities (MBS), private equity shares, complex derivatives, foreign stocks, and distressed debt. The process of estimating the value of Level 3 assets is known as mark to management.

https://www.investopedia.com/terms/l/level3_assets.asp

Because they can:

Mutual funds have restrictions in terms of buying private equity directly due to the SEC's rules regarding illiquid securities holdings. The SEC guidelines for mutual funds allow up to 15% allocation to illiquid securities. Also, mutual funds typically have their own rules restricting investment in illiquid equity and debt securities. For this reason, mutual funds that invest in private equity are typically the fund of funds type.

https://www.investopedia.com/articles/mutualfund/07/private_equity.asp

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  • 1
    Sorry, I don't feel this is a sufficient answer. Can you explain your first point more generally? And the second, "because they can" does not begin to answer how private equity would get into the mutual fund. Can you try again? – bitmaker Jun 14 at 15:42
  • @bitmaker thank you for your feedback. You're asking two questions at once and it's not clear to me what you're asking. I interpreted it as "how are they allowed to invest in private equity", which is regulated by the SEC. Did you mean to ask about the process for investing in private equity? – 0xFEE1DEAD Jun 14 at 19:14

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