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The trend of bringing retail investors into private markets is often presented as making rich-people opportunities available to ordinary folk. So it is no wonder that Robinhood Markets, the share-trading platform named after faux history’s greatest redistributor, is getting in on the act with a new venture capital-style fund. The masses, too, can now make wild bets on growth companies at imaginary valuations.
Robinhood Ventures Fund I, a listed closed-end fund, started trading in New York on Friday, with $275mn of investments in unlisted companies and about $425mn to spend on more. Among the swag in its bag is a stake in the $134bn database company Databricks and an agreement to take shares in $159bn fintech Stripe. Other investments include digital bank Revolut, smart-ring maker Oura and Mercor, a company that pays humans to fill in forms that help train AI models.
The pitch is that this is like venture capital but accessible, and in some ways better. Investors are subject to a 2 per cent management fee, deducted from the fund. That is about twice the typical closed-end equity fund’s fee, according to Morningstar. There is no “carry” — the 20 per cent or more share of profit that a private capital firm’s clients must pay — although the fund could itself be charged performance fees if it chooses to invest in hotshot tech companies through third parties.
Giving regular investors access to unlisted companies is a noble goal. But this is a blunt instrument for doing so. Buyers of the shares are, in effect, taking a bet on at least eight different companies, none of which file full public accounts or are followed widely by sell-side equity analysts. The idea that Robinhood Ventures’ traded share price will reflect those companies’ actual fundamental value is risible.
Look, for example, at Destiny Tech 100, a similar fund that went public in 2024, with an all-star line-up of investments including SpaceX and OpenAI. At one point the fund’s shares were trading at nearly 20 times their net asset value, though have fallen sharply. Robinhood Ventures’ shares, in their early hours of trading, fell 12 per cent.
When it comes to making private markets available to retail investors, much attention has been soaked up by the tribulations of private credit vehicles, such as listed “business development companies”. Investors often price these BDCs as if the loans they hold are worth less than fund managers admit. In some cases the gap is sizeable. Blue Owl’s OBDC trades at a 20 per cent discount to its last reported net asset value.
Robinhood’s plan potentially brings that problem in spades. Its reported net asset value will, in practice, be mostly based on companies’ most recent fundraisings — events that happen perhaps twice a year. Loans in a BDC may wobble in value; unlisted equities can really swing around. The ease of incurring big gains or losses is why private equity is reserved for sophisticated, wealthy investors in the first place.
For all this, the idea behind Robinhood Ventures addresses a real financial wrinkle: many large, growing and influential companies are off limits to retail investors. It makes sense that a company intent on democratising finance sees an opportunity. The risk is that Robinhood Ventures also gives the relatively less well off a new way to rob from themselves.
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