Introducing the Stableton Unicorn Index AMC

Investment unicorns are some of today’s rising stars – privately held companies with established business models, post-money valuations of at least USD 1 billion and are continuing to grow rapidly at this phase of their evolution. By virtue of the launch of the Stableton Unicorn Index offering, all classes of investor can access these outstanding and inspirational companies for the first time. Embrace the opportunity to take your investment portfolio to a new level of efficiency and anticipation.

"Innovation distinguishes between a leader and a follower."

Steve Jobs
Former Co-founder, chairman, and CEO of Apple Inc

Beyond rationality

We could begin talking about privately held unicorns in purely rational terms. Investing in unicorns makes sense regarding diversification, portfolio efficiency, and the potential to substantially boost overall performance. But let’s not get bogged down in the practicalities – dare to dream!

At the most basic level, Stableton’s raison d’etre is to make private markets accessible to those who have previously been excluded from this compelling opportunity. But our broader vision is to empower investors and the shapers of tomorrow to achieve their full potential and reach the levels of prosperity and success their open-mindedness and innovative thinking deserve.

Unicorns are leading tech or tech-enabled businesses that enrich our lives. They are forward-thinking industry disruptors with the capacity to deliver positive societal change within a short space of time. From Fintechs to E-commerce and the digitalization of healthcare services, unicorns are fledgling companies that are born to transform our existence.

As we shall see, some of the unicorns in the Stableton Unicorn Index portfolio are already household names.  Others are today’s rising stars and tomorrow’s industry leaders. An investment in unicorns is not just a sound rational decision but a statement of visionary intent and willing participation in societal improvement.

As previously intimated, investors have had to contend with limited options for decades. Their portfolios have largely comprised publicly listed securities, namely stocks, and bonds. However, these markets represent only a small proportion of the overall universe in investable securities, as the number of publicly listed stocks has contracted sharply over the last three decades.

For many years, large and sophisticated institutional investors — including pensions, endowments, foundations, and ultra-wealthy individuals — have tapped private markets to help meet their investment objectives. This reflects the ability of private market investments to outperform during periods of market stress and to generate superior returns, which are typically uncorrelated to publicly listed securities.

Privileged investors have steadily increased their allocations to the alternative, private markets asset class. In contrast, other types of investors have been forced to remain on the sidelines due to restrictive barriers to entry.

The largest obstacle was that, until now, only institutional and professionally accredited investors have been permitted to participate in private markets. Beyond this, high minimum investments of at least USD 250,000 proved off-putting, while interpersonal relationships with private market general partners (GPs) were a prerequisite in order to gain access to the best deals, which were strictly limited.

However, innovative fund structures have been removing some of the hurdles associated with private market investments in recent times, making the asset class more accessible to a broader swath of investors. But budgetary issues continued to apply, albeit to a lesser extent. We refer to this transitory development as the ‘democratization of private markets’, but feel that it can be extended further.

Hence, we have created a world-first and exciting opportunity to efficiently harness the superior growth potential of private markets, especially venture capital, to all classes of investors, even those with a limited budget, for the first time.

Investment unicorns – beyond mythology!

• The unicorn is known as the fastest mythical creature with the ability to run forever and never get tired - unicorns have been sought throughout history for their gifts of extreme strength and speed

• Intuitively, unicorn companies offer similar characteristics. They are startups that reach a valuation in excess of USD 1 billion without being listed on any stock market – proving their nimbleness, strength, and endurance

• Interestingly, the unicorn universe is expanding rapidly at a time when the number of publicly listed stocks is falling. Ten years ago, there were only 39 unicorns in existence [1], the number breached the 1000 barrier for the first time in February 2022 [2], and today the count is over 1200. Conversely, the number of companies listed on US stock exchanges has declined by around 50% since peaking towards the end of the TMT bubble

• Aileen Lee, a renowned venture capitalist, first coined the term ‘unicorn' in an article written in 2013. Lee estimated that just 0.07% of early 21st century fledgling companies would achieve a valuation of 1 USD billion

• In the infancy of unicorn evolution, the vast majority were software companies. But, more than 15 industries are represented today, including Fintech, E-commerce, Healthcare, and Artificial Intelligence.

• In order to achieve unicorn status, these innovative and tech-rich companies identify niche opportunities, which they turn into mainstream trends, and disrupt the existing status quo. These companies are truly today’s rising stars and tomorrow’s industry leaders

Introducing the Stableton Unicorn Index AMC…

Investors often seek ways to diversify their portfolios to make them more efficient and gain exposure to privately held high-growth companies in the ‘late stage’ of their evolution to publicly listed status. In addition to faster growth and lower valuations, their sharper focus can make these companies attractive investment opportunities. They have the potential to capitalize on emerging trends and technologies and may offer investors significant returns.

The Stableton Unicorn investment offering is the world’s first-of-its-kind private market product, which follows a passive selection logic and overcomes the barriers to private markets’ accessibility. It is open to all investor types, including private retail clients with limited capital, and no preexisting private markets relationships are required. With just one investment decision, investors can participate in a complete, cost-effective, and diversifying private market solution with enhanced liquidity compared to existing private market funds.

Morningstar Indexes has created the (benchmark) Morningstar^® PitchBook^® Unicorn Select 20 Index™ to assist Stableton in making private markets more accessible. Their rules-based selection of index constituents allows for complete transparency at the index level. The benchmark follows the performance of the largest 20 privately held, late-stage venture capital-backed companies, with post-money valuations of at least USD 1 billion, from developed market countries.

Over almost ten years, from 12/2014 to 03/2023, the Morningstar^® PitchBook^® Unicorn Select 20 Index™ outperformed public equities significantly (22.2% p.a. vs. 8.3% p.a.). For this comparison, public equities are represented by the Morningstar® Developed Markets Target Market Exposure Index™. Please consult the Morningstar page or the Stableton page for further details.

As can be seen from the table below, some of the current index constituents are already household names such as the Fintech Revolut, and Epic Games, a leading software, gaming and entertainment company.

Benchmark Index Performance as of 30/03/2022

*Stableton Unicorn Index AMC is not sponsored, endorsed, sold or promoted by Morningstar Switzerland nor any of its affiliates (individually and collectively, “Morningstar”). Stableton Unicorn Index AMC is created and maintained solely by Stableton Financial AG (“Stableton”) using certain components of the Morningstar® PitchBook® Unicorn Select 20 Index™ and certain additional components selected by Stableton. Morningstar has no relationship to Stableton, other than to license Stableton the right to use the Morningstar® PitchBook® Unicorn Select 20 IndexTM in the investment strategy for the Stableton Unicorn Index AMC. Morningstar has no responsibility for the compilation or maintenance of such investment strategy or the Stableton Unicorn Index AMC, and no liability to Stableton or any third party for its use. Morningstar is not responsible for and has not participated in the determination of the prices and amount of the Stableton Unicorn Index AMC or the timing of the issuance or sale of the Stableton Unicorn Index AMC or in the determination or calculation of the equation by which the Stableton Unicorn Index AMC is converted into cash. Morningstar has no obligation or liability in connection with the administration, marketing or trading of the Stableton Unicorn Index AMC. MORNINGSTAR DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE STABLETON UNICORN INDEX AMC OR ANY DATA INCLUDED THEREIN AND THE MORNINGSTAR ENTITIES SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. THE MORNINGSTAR ENTITIES MAKE NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY STABLETON, OWNERS OR USERS OF THE STABLETON UNICORN INDEX AMC, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE MORNINGSTAR® PITCHBOOK® UNICORN SELECT 20 INDEX OR ANY DATA INCLUDED THEREIN. THE MORNINGSTAR ENTITIES MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE MORNINGSTAR® PITCHBOOK® UNICORN SELECT 20 INDEXTM OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL MORNINGSTAR HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.

The Morningstar Indexes Benchmark*

The three most represented verticals in the index are currently Fintech, E-Commerce, and Software. Each of these verticals offers substantial scope for further market penetration and open-ended growth potential.

Stableton’s investment strategy aims to broadly reflect the composition of this index, which is dynamically adjusted to encompass the top 20 unicorns over any given period. This allows for attractive fees for the investment product, compared to more expensive strategies, which are based on research-driven security selection and active management.

The Stableton investment concept is based on a structured product, known as an actively managed certificate (AMC). These certificates are generally transferrable, which improves the liquidity of a typically illiquid asset class. They can be purchased directly through your bank or broker, with minimum investments starting from just USD 100.

Benchmark index constituents [3]

*Undisclosed, please get in touch with us for further information

Adding an Allocation to Private Markets Increases Portfolio Efficiency

Source: Morningstar and Stableton

As illustrated above, an allocation to private markets through the Stableton Unicorn Index AMC can help diversify a portfolio of traditional assets by adding a third, typically uncorrelated return stream. This improves portfolio efficiency and enhances risk-adjusted returns

Specific benefits of investing in the Stableton Unicorn Index AMC

• Delivers genuine diversification

  Enhancing portfolio diversification through private markets exposure is essential, given that public markets are increasingly correlated and have limited exposure to important technology themes

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• Redefines the private market investment landscape

  The world’s first private market product that follows a passive selection logic - open to all investors

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• Mitigates the complexities of entry and exit

  The product offers a unique combination of low investments minimums, easy accessibility, improved liquidity and the additional possibility of secondary transactions through the Stableton Liquidity Desk

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• Replicates the performance of private market luminaries

  Provides easy access to the absolute leaders of the private markets universe by focusing solely on the top 20 unicorns, thus targeting exposure to some of the world’s most exciting tech-enabled companies – today’s rising stars and, quite possibly, tomorrow’s industry leaders

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• Transparency in an opaque marketplace

  An easily understandable strategy that caters for the needs of a typical ETF investor - while not entirely passive, the Stableton offering aims to be the closest ETF equivalent in private markets

A unique collaboration of industry innovators…

The Stableton Unicorn Index AMC is the result of a unique collaboration between Morningstar Indexes, Stableton and Swissquote, all of whom bring their expertise and commitment to the table to carry out singular functions in relation to the launch and operation of the product.

The Morningstar^® PitchBook^® Unicorn Select 20 Index™* delivers timely insights and unprecedented transparency into the performance and behavior of some of the largest global unicorns from developed markets.

Stableton leverages its unique market and structuring expertise, private market transaction experience, strong deal-sourcing networks, and knowledge about secondary market pricing. These attributes enable Stableton to carry out the investment strategy with the aim to reflect the index holdings as closely as possible and to potentially achieve similar performance to the index over time via a price-efficient execution, which also benefits the overall liquidity of the offering.

For the Actively Managed Certificate, Swissquote acts as Stableton’s official launch partner in Switzerland for retail investors. With this strategically important product innovation, Swissquote can expand its range of products and provide its clients with access to unique private market investments.

Join us as a private markets pioneer…

As we have seen, private market investments have historically generated superior returns to publicly listed equities and typically outperform substantially during periods of economic stress.

While investing in private markets is considered to carry a higher risk than that associated with traditional equities and bonds, it is important to reiterate that unicorns have already established a robust business model. The success of their models has allowed them to achieve a valuation of USD 1 billion, which typically takes five-to-seven years. Furthermore, at this stage of their evolution, they typically still continue to grow much faster than publicly listed companies.

An allocation to the Stableton Unicorn Index AMC has the potential to enhance the performance of a traditional portfolio in both nominal and risk-adjusted terms. Stableton is the first private markets specialist in the world to make the most exciting unicorns universally investable.

In doing so, we have eliminated all conventional barriers to entry into the private markets universe. Namely, high minimums and participant restrictions, excessive fees, long lock-up periods, opacity, and deal selection complexities.

Efficiency is doing things right, effectiveness is doing the right things…

Isn’t it time you took your investment portfolio to a new level of efficiency?