Although ProShares is best known for its lineup of leveraged
, the company is beginning to branch out into the unlevered
market as well. The firm has debuted more of these types of
products in the recent past, while it has also begun to offer up
more in terms of filings in this regard as well.
The company just released a new filing on a hedged high yield
bond ETF while it also revealed plans for a new equity focused
ETF as well. This proposed product,
according to a recent SEC filing
, will target the private equity industry as the ProShares
Private Equity-listed ETF.
While some details were not released in the initial filing,
such as expense ratio or ticker symbol, a few key points were
made available, which we have highlighted below:
The fund will track the LPX Listed Direct Private Equity Index
which looks to act as a broad benchmark for the private equity
industry. In order to be included, the private equity portion of
the company's business must be at least 50% of the total assets
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This will include direct and indirect private equity
investments, the fund management business, as well as cash and
post-IPO listed investments as well. In terms of 'direct' private
equity investments, the provider will consider those that are in
either equity, mezzanine, or debt facility of a private firm, or
in investments in limited partnerships managed by the investee's
Potential investors should also note that the index provider
intends for there to be 30 companies in the final basket with a
liquidity screen applied in order to weed out the illiquid firms.
Additionally, the filing says that the holdings will consist of
American and foreign securities and that is 'including in large
part business development companies' so this type of security
could make up a decent chunk of assets in the final ETF (read
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This could make the ETF an interesting alternative for those
seeking a level of exposure in the financial market, but
something that goes beyond big banks and targets companies closer
to the ground floor. Furthermore, the space generally pays out a
decent yield so interest in these types of securities could
remain high assuming that the low rate environment continues for
quite some time.
In terms of alternative private equity ETFs, there aren't a
great deal of ETFs currently occupying the space, but there are a
few competitors out there that could square-off against
ProShares' proposed ETF nonetheless. These include both funds
that are in the private equity market and those that are in the
broad BDC space as well.
The most popular in this segment is easily the
PowerShares Listed Private Equity ETF (
which has just under $300 million in AUM. This product has a
clear focus on private equities although it does also include
MLPs and BDCs in its basket (see
Do You Need a Private Equity ETF?
Beyond PSP, there is also a relatively new ETN, the
ETRACS Wells Fargo Business Development Company ETN
which pays out a solid yield of 9.8%, but is far less popular
than PSP. In fact, the market cap is just $20 million for the
note, suggesting that investors haven't embraced this product as
a way to access the business development company space.
The presence of multiple funds in the space does probably mean
that it will be difficult for ProShares to see success from an
asset perspective with its proposed fund. However, their possible
private equity ETF could offer up more of a balance between
private equity firms and BDCs so it could act as a 'middle road'
between BDCS and PSP (read
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If that is the case, the fund could see some decent inflows,
especially if it is able to keep expenses low and dividends high
for this proposed product in what is becoming an increasingly in
focus corner of the investment world.
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