Anthropic & SpaceX In ONE ETF — How Retail Investors Access Private AI | Derek Yan

Transcript

Private Giants Enter The Spotlight

SPEAKER_00 0:04

All right.

SPEAKER_01 0:06

I'm your host, Melanie Schaefer. Welcome to Lead Lag Live. Now there's a$380 billion company reshaping the future of artificial intelligence. And until very recently, you couldn't buy a single share. Anthropic just closed a$30 billion funding round, the second largest private tech raise in history. And also noteworthy is that SpaceX is eyeing a June IPO that could raise$50 billion and become the biggest public listing the world has ever seen. And yet for the average investor watching this right now, these names have been completely off-limits, locked behind gates that only the wealthiest and the most connected investors can walk through. But that's starting to change. A new breed of ETF is putting names like Anthropic and SpaceX inside a ticker symbol that you could buy from your brokerage account before lunch. My guest today is Derek Yan, senior investment strategist at CraneShares, the firm behind AGIX, which is an ETF that holds both Anthropic and SpaceX directly. Derek, it's great to have you here.

SPEAKER_02 1:11

Thank you for having me.

SPEAKER_01 1:12

So Derek, let me ask you just straight up, what is AGIX and why should people care about it?

SPEAKER_02 1:19

Yeah, so AGX is uh kind of an AI ecosystem that invests both public and private AI names. So when we launched the fund, we tried to create a benchmark for investors to tap into the AI opportunity. But when we launched the fund, we realized uh a lot of innovative AI companies actually is in private stage, right? So and they choose to stay in private stage longer. So that's why we kind of like become one of the first uh ETF to directly invest in the private AI names uh such as uh Anthropic and XAI, uh which now become part of the SpaceX.

SPEAKER_00 2:01

So and there's a few ways that investors can can get exposure.

SPEAKER_01 2:13

Closed-end funds, um for example, SQBs, direct order share. How is AGIX different from from what else is I care?

SPEAKER_02 2:21

Yeah, I think a lot of investors, they when they look at like, oh, like access to private, right? Like there's several funds available on the like brokerage accounts, um, which are the closed-end funds. So closed-end funds tends to basically is is like IPO of a bunch of assets. Then once it's IPO, um, the price is basically the secondary market trading. And usually when you look at a price, it tends to trade at a huge premium compared to the net asset value, the NAP. So what an investor end up buying is, say, just an example, like 10x more expensive than what the asset value is. So that creates a problem because like even though the asset, like even after IPO can potentially go higher, but you're paying way more to buy those assets. So I think that's kind of like the problem for closed-end fund. Um so for AGIX, it's open-end ETF. Uh, just similar to many other uh ETFs starting to hold private assets. There are several ways, right? So um there's you can, I think like there's a lot of um um companies, other companies uh get access to those private names through uh SPV, uh special purpose vehicle. So SPV is end of the day, it's like agreement, right? So um say there's an employee of that company, they they sell um shares to like a venture fund, then the venture fund can use a special purpose vehicle to hold that shares. Uh and your you can they can sh that venture fund can sell that SPV shares to an ETF company, right? So ETF company is buying a contract. Um that that's that's there's some like um counterparty risk first, right? So you never know if the GP um is legit. Um then potentially think there could be like additional cost. Um there could be like fees and carry on SPV. Um and also like there's a risk that company may never approve it because that transaction, you buy the the ETF buying the SPV may get um like rejected by company, right? So um there's so many uh I think like uncertainty around SPV. But it it is typical though, uh in in a secondary market transaction. Um but but at creatures uh for AGIX, we choose a different route. Uh we uh for the anthropic and uh XAI exposure, uh we uh invest directly. So AGIX uh on behalf of Crantichers Trust is the actual shareholder. Uh we sit on the cap table of both companies. Um so that's really there's no kind of like um additional fee, right? Uh potentially in between, right? Um is really the fund buying the shares of the company uh on the private market, right? So that's kind of like a direct ownership. Um so yeah, there's several ways for investors to get access to the private market, but I think like investors should be more educated to really understand the difference and compare the pros and cons for those different access.

SPEAKER_01 5:47

Yeah, so what I was looking at at the fund, that's something that jumped out at me, anthropic at SpaceX are less than 15% of the fund, but over a fifth of the returns. Can you walk me through that?

XAI Merge And SpaceX IPO Stakes

SPEAKER_02 5:58

Yeah, so that's also like a big difference between kind of like closed end and open-end, uh, because for open-end uh ETF, right? So just it's regular ETF, uh, there's uh SEC requirement that illiquid asset can no longer can cannot be more than 15% of the portfolio. So that gives you a cap, right? So as an investor, you're investing ETF, but like uh if if for example AGIX, um our private exposure cannot be higher than 15%. So when the time we by the time we invest, we target around a 10% investment in the private. Um and thus building some buffer of, say, the fair value appreciation, right? So if those assets appreciated as you know, the valuation can can increase or the secondary market can uh see like higher valuation uh increase, that makes the uh appreciation in assets, and that could like make the total exposure private close to the 15%. So that's how we really want to manage that risk. Um being compliant uh compared to many other funds that's like, yeah, maybe go beyond 50% or just like um profit is like uh comes to some liquidity risk. Uh so we want to really manage the in a more institutional way, um, to really have a compliant exposure to those private companies.

SPEAKER_01 7:28

Yeah, so talking about um risk, like earlier this year when XAI merged into SpaceX and the shares converted into a combined company, what did that change for investors and and what does that mean for potential mergers in the future?

SPEAKER_02 7:43

Yeah, exactly. So um when the XAI and SpaceX merge happened, uh our investment into the XAI, those shares, just automatically automatically converted to the SpaceX shares. So now we own SpaceX. So um now kind of like uh I mean like SpaceX is a very interesting company. Um it owns the launch capability, allows the starting. Um it's kind of like both infrastructure and potentially now with XAI is having an AI model uh in the ecosystem, right? So that's a lot of synergies, I would say, uh, given the potential of um Elon Musk has this vision of building data centers in the space, or just using the cash flow generating from the satellite business to fund the AI growth. So with all that, I mean like that's kind of like a very smart way to put asset together and unlock a lot of value. Um and especially I think like recently uh SpaceX news come out, right? Like IPO could be very soon, uh information really released uh the rumors, like potentially just in a few weeks, uh, that we can see the fighting of the SpaceX. So I think like by then, like people can really understand the business more. Um get like I think all Investor is gonna be really watching this because this is gonna be the largest IPO apper if the number is gonna reaching uh 75 billion, uh-huh, is it's much, much bigger compared to um the previous IPOs. So um given the potential uh market cap, uh it could likely be the top 10 of SP and NASDAQ, right? Like that's kind of like probably never happened in history, right? When your IPO and you like instantly become your top 10, that's that's I think that's really like how we think about this. A lot of companies they choose to stay in private much, much longer. So investor missed a lot of the value creation. Um like like think about like previously like 10 years ago, um uh like company when they reached like 100 billion, they shoot already, IPO'd, right? They shoot already in your portfolio. But today, companies like anthropic 380 billion um uh SpaceX trillion. That's kind of like that's that's the size that can easily go into your top 10, top 20, but still in the private. So that's that's why in AGX we we choose to include it in the portfolio in the ETF, so investor can get access um and uh enjoying that kind of like value appreciation be uh potentially um uh when before the IPO.

Why Anthropic’s Growth Gets Attention

SPEAKER_01 10:44

Yeah, so Deregan, speaking about uh Anthropic specifically, your position quadrupled in under a year. Where does that go for year? What should investors be watching for um in AGIX?

SPEAKER_02 10:55

Yeah, when we invested Anthropic about a year ago, I I feel like a lot of investors, the general investors, they're not so familiar with the name. Um a lot of like tech investors were just like um people who work in the tech were were familiar with the AI. They definitely know Anthropic uh as kind of like the leading player in the enterprise AI, and also like the coding and a lot of those automation, agenda AI solutions coming out. Um so that gives us like a very strong confidence in the company because we believe um that the AI, just like so early, um, as we are kind of like um transitioning from the chat box to the AI actually can do work, right? So the AI agents coming out, um, coding, do the uh all kinds of genetic solutions, um, can finish tasks and planning, can reason, um, can do the work for you. Um so that's that's kind of like the the trend, I think, like is kind of like early stage of the internet, but like this is a new wave of development. And anthropic is without a doubt uh at the center of this new wave. Um so we think like potentially uh anthropic can be um one of the most, or maybe the most important uh AI logic next model uh in the US and globally, because um if you think about the next round of the um genic AI solutions, all those AI agents can become uh, like say Open Cloud or many other tools, um, driving uh the new round of automation in our workspace and old enterprises. Um that is something I I think unlocked a lot of value, just replacing a lot of softwares, replacing a lot of kind of like traditional um um very like simple automation. Um that's um company I think like is really getting like you've probably you've seen the news of their revenue growth is something we've never seen in history. Um so for a company like Anthropic is really now dominant the AI large model space. Um then um I would say like also we're hearing that the potentially anthropic could go IPO uh this later this year or potentially next year, but like that's telling you that the investor already recognizes um the value of anthropic. Um if you go to kind of like the private market and it's like you know, there's secondary market transactions for those private companies. Well, it's really hard to get access now because uh most people already recognize the uh the importance of anthropic compared to competitors like OpenAI, compared to Gymni. So that gives like um uh Anthropic uh a lot of um attention, right, right now. Um so yeah, so I think like for AGX, uh we're quite aware positioned uh with those two companies. Potentially, you could have like liquidity event uh this year. Um that adds a lot of value to the fund uh for investors.

Daily Pricing Of Private Shares

SPEAKER_01 14:11

Where does it get tricky, though, Derek? Because I mean you're pricing private companies every day inside a fund that anyone can sell. How does that not get messy sometimes?

SPEAKER_02 14:21

Yeah, so we have a very standard uh fair value uh process um because we hold those assets, those assets in the farm. So uh you need to really fair value it. Um, because the ETF provides a daily liquidity, anyone can trade it, right? So um how to really build the appropriate NAV for the fund, right? Like the net asset value. Um so our fair value uh of anthropic and space acts really center around um the kind of like information we we know, right? First, uh the most important is really anchored around the last primary round when they raised uh new capital, right? So um those are the information kind of we can get from the company uh what is the latest uh share price uh for the for those shares. Um then we can also monitor the secondary market transactions. Uh we have several data vendors that can monitor the buy and sell of those private shares in the secondary market, uh, where's the latest uh kind of like valuation people are trading at? If that valuation really um uh deviates from the previous round, um the fair value community actually can fair value that accordingly. Um so with those processes, we actually provide uh kind of like with we think the best practice or the fair value uh and um provide liquidity, right? Um for for the CTF uh when investor can actually uh buy it every day.

Staying Ahead After Companies IPO

SPEAKER_01 15:59

Yeah, but so so that's the when they're private. Now like we've already mentioned that they're most likely going to go public. It's we're talking about ATropic and SpaceX. If they do, does AGIX still have an edge?

SPEAKER_02 16:13

Yes, we have uh actually very strong pipeline. We're talking to another company um that potentially we're gonna add more names uh in the AGX. Um and yeah, uh like when they become IPO, um, that's good for the investor of AJX. Um uh so I think like uh then when they become like a public company, uh then our 15% limit is now um we have more like dry powder, right? So for the uh for additional names, this additional exposure to the private. Um so I think AJX is really like um um involving fund, right? Like when there's IPO, then there's potentially new private names coming to the flowed. Um then we can keep adding new exposure to the private. Uh I think like um this trend of private companies staying in the private is gonna continue given the abundant capital available in the private space. So I think the strategy still works as the investor keeps getting new names uh and also enjoying uh access to the companies before IPO, right? So um that's kind of like a very unique strategy. Um, but like that's already the strategy for high-net wealth family office and institutional investor for many, many years. Uh, if you think about like traditional, say, family office allocation to private, you know, that's about like 10 to 15 percent. Um uh it's so for typical ordinary investors, like it's really hard to get access to say private equity firm. Um, to those funds can lock up like 10 years or charge 220, um, it's very difficult. But like get to the late stage, like um the company you already know um in the private space, now within an ETF ecosystem, uh, it's actually quite innovative. We think um providing um complete solution for investors, especially when those companies choose to stay in private much longer now.

SPEAKER_01 18:21

Yeah, Derek, so for investors and and advisors, uh watching who want to dig deeper uh in into APIX, where should they go to learn more?

SPEAKER_02 18:30

Yeah, we um we have all the found documents and fact sheet, FAQ research paper uh on the credentials.com uh slash AGIX. Uh so investor can log to our website and just download all the relevant in information. And of course, like when you have any questions, um, you can email us at info at creentious.com. Um happy to have a follow-up discussion with advisors, uh investors who have uh more questions on the structure or details about AGX.

SPEAKER_01 19:07

Fantastic, Derek. Thank you so much for joining me. Yeah, thank you for having me today. And thanks everyone for watching.

SPEAKER_00 19:14

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