(Bloomberg) -- From Wall Street funds to small-time day traders, those who dared to bet big on Elon Musk’s business empire are closing out the year with hefty payoffs, as Donald Trump’s US election win turbocharges the fortunes of the world’s richest man.
Musk’s support for Trump during the campaign and his appointment to the newly created Department of Government Efficiency have made his enterprises, including Tesla Inc. and private unicorns SpaceX and xAI, hot properties. Their market value has surged this year, elevating Musk’s own personal wealth past $400 billion.
Among those to successfully surf the Musk trade is closed-end fund Destiny Tech100 Inc., which has surged more than 500% since the Nov. 5 election. The fund invests in shares of private-market unicorns, and its latest filing showed that more than a third of its holding comprised a bet on SpaceX at the end of September. Trump’s win brought a rush of retail investors to the fund, lifting its shares to an eye-popping premium to the value of its underlying assets.
“The election was a big catalyst for these ‘Trump derivatives’,” said Todd Sohn, an ETF strategist at Strategas. “Musk is clearly involved with the administration, so investors went to the funds where they can get quick exposure to his firms.”
Some old-school stock pickers such as the Baron Partners Fund have also emerged winners. The fund is set for a near 40% year-to-date return — well in excess of the Nasdaq 100 — having been in the red on the eve of the election. Its octogenarian manager Ron Baron, counts Tesla as his biggest holding, comprising 40% of its assets, while SpaceX accounts for 10% as of November.
Another of this year’s Musk-linked turnaround stories is Cathie Wood’s flagship $7 billion exchange-traded fund ARK Innovation ETF. As of October, ARKK appeared set for a year of negative returns, but surged more than 25% since the election.
Additionally, the ARK Next Generation Internet ETF, which has exposure to Tesla, Bitcoin and digital asset firms, is headed for more than a 50% gain this year. Sohn of Strategas counts these as direct beneficiaries of the Musk trade.
Musk’s companies are benefiting from expectations that the new administration will streamline the rollout of self-driving cars and eliminate tax credits for electric vehicles, that help Tesla’s rivals. SpaceX makes most of its money from US government contracts and can likely win more support under a Trump administration.
While SpaceX, valued at $350 billion, has become the world’s most valuable start-up, Tesla’s market cap has soared more than $500 billion since the election. Musk’s artificial intelligence startup, xAI, is seen to have more than doubled in value to $50 billion since it last raised money in May.
Some of the vehicles scoring big gains could prove risky, however, given they often trade at huge premiums to their underlying assets. For instance, DXYZ’s $800 million valuation is the highest since April, and it trades at more than 10 times its latest published NAV, putting its premium among the highest of similar closed-end funds.
The Baron fund, meanwhile, is in the top 1% of its category in the past month, data compiled by Bloomberg shows. While taking concentrated bets can backfire, the strategy reversed the fund’s underperformance this year.
“I wouldn’t say it’s common,” said David Cohne, an analyst at Bloomberg Intelligence, said of the reversal. “The fund was rewarded by management’s conviction in Tesla, which benefited from Musk’s relationship with Trump’s.”
--With assistance from Dylan Sloan.
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