Robinhood opens door to retail with US$1bn private markets fund
Robinhood Markets is seeking to raise US$1bn from a closed-end fund to invest in private companies, giving retail investors the chance to buy into some of the hottest tech names ahead of what could be one of the biggest IPO cycles in capital markets history with record-breaking floats anticipated for SpaceX, OpenAI and more.
Goldman Sachs is sole bookrunner on the proposed sale of 40m shares, including 5m by Robinhood itself, at US$25, with pricing expected after the market close on February 25.
“We want to do for private markets what we’ve already done for public markets and make them accessible to all, regardless of who you are and what your bank balance is,” Robinhood Markets CFO Shiv Verma said in a presentation livestreamed on YouTube on Tuesday.
Robinhood Ventures Fund I has already invested roughly US$275m into seven private companies since it was established in September, including US$75m in data and AI platform Databricks and US$50m in digital bank Revolut. As of January 31, those investments were valued at US$281.9m, up 125%. The fund also has an agreement to purchase US$14.6m secondary shares of online payments company Stripe.
The new fund comes after the SEC relaxed longstanding restrictions on closed-end funds that invest in private assets. Previously, funds with more than 15% of assets in private investments were restricted to accredited investors – defined as individuals with at least US$1m of net worth and corporations with at least US$5m. The new rules allow broader retail participation, opening the door to products like RVF.
Robinhood’s clients will even be able to purchase fractional shares, which could help drive large-scale retail participation.
Closed-end fund IPOs and similar funding vehicles historically have struggled because of fees paid and drag on investment. Bill Ackman’s Pershing Square Asset Management, for instance, was forced to abandon plans for a closed-end fund of Pershing Square USA in late 2024, downsizing the initial target from US$25bn to US$2bn before ultimately pulling the plug.
RVF is hoping to address concerns over investment drag by launching with an existing portfolio.
Robinhood has also agreed to lower fees to 1% of AUM for the first six months and not charge a 20% performance fee, a standard feature of traditional hedge, VC and private equity funds. The base fee rises to 2% of AUM after six months, or about US$25m annually on the US$1.275bn of AUM after the IPO.
RVF intends to employ leverage up to the maximum of 33.3% of AUM allowable for US closed-end funds.
Goldman stands to collect US$31.25m of fees from the RVF IPO on the number of shares being sold in the base deal, blended as 3.5% for the first US$500,000 and 2.75% for the rest. The bank has an option to sell an additional 6m shares on which it would be paid a 1.5% fee if exercised.
After underwriting fees, and excluding secondary shares sold by Robinhood, RVF is raising US$847.6m in net proceeds.
The open question is whether Robinhood's vast user base will seize on the offering. There is clear precedent for the value of private investments in the public markets.
The Destiny Tech100 closed-end fund, whose largest holding is SpaceX, trades at US$29.45, or 147% of its last reported US$19.97 NAV per share as of December 31. That fund has taken advantage of that premium valuation by selling stock on the open market, including US$244.6m raised in the fourth quarter via an at-the-market programme run by Jefferies.
Cathie Wood’s Ark Investment Management’s interval closed-end fund and the Baron Partners mutual fund are other vehicles that invest in private companies.
The ARK Venture Fund, whose holdings include SpaceX, xAI, Databricks, Groq and OpenAI, carries a 2.9% net expense ratio, requires minimum US$500 investment and is not traded on exchange, with liquidity available on a quarterly basis and redemptions limited to 5% of AUM.
Meanwhile, Baron Partners charges 2.24% in expense ratio, doubling peers' 0.96% average, potentially hurting investors' returns.
For Robinhood, the RVF closed-end fund is an extension of the company's broader push into private assets. Last summer, the broker launched tokenised access to OpenAI and SpaceX shares in Europe via special purpose vehicles – an initiative that immediately drew backlash from OpenAI, which argued the tokens represent actual equity.