ProShares, the ETF provider known historically for its leveraged
and inverse funds, continues its foray into new strategies with
today's launch of an ETF that hones in on private equity firms,
jumping into a thinly populated space anchored by the veteran
PowerShares Global Listed Private Equity Portfolio
The ProShares Global Listed Private Equity ETF (PEX), which will
have its primary listing on the BATS Exchange, will track an index
from LPX GmbH and invest in up to 30 listed private equity
companies, screened for liquidity as measured by trading volume
relative to market capitalization.
The fund will have a net annual expense ratio of 2.54 percent,
which includes a fee reimbursement of 0.40 percent, and acquired
funds fees of 1.94 percent, according to the most recent
prospectus. By comparison, PowerShares' $360 million PSP, which has
been around since 2006, has a net cost of 2.32 percent.
PEX is the second private-equity-type strategy to find its way
into the ETF market this month. The fund's launch comes on the
heels of Van Eck's rollout of the Market Vectors BDC Income ETF
(NYSEArca:BIZD), listed earlier this month-a fund that invests in
25 business development names.
The timing of this launch seems ideal considering that mergers
and acquisitions is a "hot" sector right now, and that interest
rates remain low in historical perspective, both of which are good
for private equity firms that are highly dependent on debt
leverage, IndexUniverse ETF analyst Spencer Bogart said.
"Companies have lots of cash, they're looking at what appears to
be an improving economic environment, and they can borrow at low
rates," Bogart said. "Put them together and you've got a bit of a
perfect storm for private equity."
provide investors with liquid exposure to the private equity asset
class without minimum investment requirements, amounting to
immediate exposure to a diversified private equity portfolio,
"Of course these are standard things for the ETF world, but for
people familiar with private equity, it's very different than the
traditional unlisted private equity investments, which usually have
high minimum investment amounts, are illiquid and usually lock up
your investment for some period of time," he said.
ProShares defines an eligible listed private equity company as
one for which its direct private equity investments-as well as cash
and cash equivalent positions and post-initial public offering
listed investments-represent more than 80 percent of the total
assets of the company.
"Candidates for the index will have a majority of its assets
invested in or exposed to private companies or have a stated
intention to have a majority of its assets invested in or exposed
to private companies," the company said in the filing.
The strategy, which includes equities of all market
capitalization, is rebalanced quarterly.
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