Direct ownership · standard form · transferable unit

From Separately Managed Accounts to an Institutional Market

A principal-protected growth instrument, owned directly by each investor, and standardized so that one account can sell it to another.

The Unit

Per $100 of face.

Note

Face 100

5-year bullet carrying a right to require prepayment in kind, secured 1:1 by U.S. Treasury STRIPS bought at 79.00.

Warrant

20%

Fully diluted, nominal strike, no anti-dilution, exercisable from issue until 90 days after maturity and immediately on a change of control.

Prepayment right

Any time

Require prepayment in kind of any fraction of the STRIPS at any time, satisfying the Note at par, out of pledged collateral held by an independent collateral agent.

The Note, the prepayment right and the Warrant.

Stage 1 · Direct Ownership

Stage 1

Each investor holds the unit in its own separately managed account

Each account owns its positions directly, in its own name and at its own custodian, with no pooled vehicle between the investor and the asset. The investor holds it directly or through an adviser of its own choosing, outside the structure.

Investor's SMA

Direct ownership · own name · own custodian

Project A · software

Standard unit

Project B · healthcare

Standard unit

Project C · industrials

Standard unit

Project D · consumer

Standard unit

What each account owns, directly

The Note, its prepayment right and the Warrant; its own tax position; and only the vintages, sizes and Projects that fit its own mandate. Every account holds the same standard unit.

The liquidity gap

An investor that needs cash before year 5 has one exit today — exercising the prepayment right. Exercise delivers STRIPS at their accreted value but cancels the matching share of warrant coverage, so the investor surrenders its upside to get its liquidity.

Stage 2 · Accounts Transacting

Stage 2

One SMA sells its units, every piece together, to another

The buying account enters a seasoned position: the warrant is already running and the Treasury floor is already accreting toward par.

Exercise the prepayment right

STRIPS only; warrant coverage cancelled.

Sell to another SMA

Note, prepayment right and Warrant, together, sold at full value.

Same need for cash — one path surrenders the upside, the other sells it.

The prepayment right remains the backstop; a sale becomes the first resort.

What this creates

A price for every position.
A floor that is observable daily from the STRIPS curve.
The warrant marked separately from the floor.
A seller that keeps the upside it earned.

Stage 3 · The Institutional Market

Stage 3 · Contemplated future state

Where standardized units trade between accounts

Each step builds the infrastructure for direct account-to-account transactions.

Step 1
Standard form
One document and one waterfall for every Project.
Step 2
Appraised marks
The STRIPS curve for the floor, plus a valuation policy for the warrant.
Step 3
Dealer quotes
Bid and ask against the maturity-matched Treasury.
Step 4
Institutional SMAs
Credit funds, pensions, endowments and family offices, each in its own account.
Step 5
Trading venue
Many buyers and sellers, with cleared settlement.

Why separately managed accounts

Direct ownership: the investor owns the unit itself, not an interest in a vehicle that owns it.

Portability: units move between accounts without redeeming anything.

Tax fit: the cash-neutral coupon works on each holder's own position.

Fit to mandate: each account holds only the vintages, sizes and Projects it wants.

Clean economics: nothing is paid to any adviser out of the raise; an investor's adviser is paid by its own client.

Contemplated future state; not currently available. Units transfer whole — every piece together — and only to accredited investors and qualified institutional buyers. Making markets and operating any trading venue require registered broker-dealers, and a venue would operate as an alternative trading system. A transfer between two clients of the same adviser requires a fair price and client disclosure, and client consent where the adviser acts for both sides.