April 23 (Reuters) - A new fund that allows shareholders

access to privately owned technology companies has sent

investors on a wild ride in recent weeks while eliciting

criticism from the likes of Morningstar and competitor ARK

Investment Management.

Shares of Destiny Tech100 ( DXYZ ) are up some 200% since

its March 27 launch, following a tumultuous three-week run that

has seen it rise by as much as 1,172% from its debut price of

$8.25. The fund's shares closed Monday down 13.1% at $24.68.

The fund owns stakes in about 25 private technology and

growth companies, including SpaceX, OpenAI, Instacart and online

payments processor Stripe. It plans to update its holdings on a

quarterly basis, and creator Sohail Prasad said last month that

he would like it to eventually hold 100 companies.

It currently has a market capitalization of $276.46 million.

Last week, it filed with the SEC for a secondary stock sale of

up to $1 billion in new shares.

Though it's not the first fund of its kind, Destiny Tech100 ( DXYZ )

appears to have caught the fancy of the meme stock crowd, which

has helped fuel furious swings in shares of everything from

GameStop to more recent offerings such as Trump Media &

Technology Group ( DJT ).

Prasad founded DestinyTech 100 in late 2021, with the goal

of giving wider access to a diversified pool of pre-IPO

companies that are usually reserved for high-net worth

investors.

"These are companies that people know and love and often use

in their daily lives, but can't invest in unless they're

wealthy," he said.

He sold 200,000 shares of the fund on April 12 at a price

of $24.65, the same day the fund filed for a secondary offering.

Prasad still owns 1.08 million shares, according to the SEC

filing. Shares of the fund hit a 52-week high of $105 on April

8.

Other funds have offered similar products - including ARK

Investment Management, the firm headed by Cathie Wood. The ARK

Venture Fund debuted in September 2022 but has been slow to

attract investors, resulting in them paying higher ownership

costs than originally estimated.

A year ago, ARK offered waivers and reimbursements of those

fees, capping them at 2.9%. That fund now has total assets of

$53.7 million.

Destiny Tech100 ( DXYZ ) levies an estimated fee of 4.98%, according

to its SEC filing.

Speaking to Reuters following an event in London, Wood said

the rival fund's structure and fees mean investors face "a much

higher price point" in exchange for daily liquidity.

In a note to investors, ARK last week argued its approach

to pre-IPO investing is better than Destiny Tech 100's, saying

it offers a share price closer to the net asset value of the

shares and shareholders can redeem up to 5% of the fund's total

assets quarterly.

"We believe liquidity matters most," Prasad told Reuters in

e-mailed response to the ARK critique, adding "we made it

simple" by allowing investors to buy and sell shares of DXYZ via

their existing brokerage platforms.

Prasad added that he appreciates that ARK's comments have

helped educate investors about the concept.

"There's a lot of structural change occurring in the private

markets and it is great to see another forward-thinking firm try

to drive innovation and progress."

Morningstar also published its own criticisms of Destiny

Tech100 ( DXYZ ) last week, targeting some of the same issues raised by

ARK.

"Investors would be wise to stay on the sidelines" in light

of the fund's structure, Jack Shannon, senior manager research

analyst at Morningstar, said in a report. "Destiny Tech100′s

massive premium represents a unique opportunity for investors to

enrich others at the expense of themselves."

Prasad declined to comment on Morningstar's assessment.