Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Looking To Add A Private Equity Stake To Your Portfolio? 2 ETFs Worth Holding

By Investing.com (Tezcan Gecgil/Investing.com )ETFsDec 07, 2020 04:55AM ET
www.investing.com/analysis/looking-to-add-a-private-equity-stake-to-your-portfolio-2-etfs-worth-holding-200547011
Looking To Add A Private Equity Stake To Your Portfolio? 2 ETFs Worth Holding
By Investing.com (Tezcan Gecgil/Investing.com )   |  Dec 07, 2020 04:55AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Well-run private equity firms are currently in a strong position to boost the value of their investments. The main reason: COVID-19 has opened opportunities for many such firms to snap up assets at discounted or even distressed prices compared to a year ago.

What Is Private Equity?

Private equity can be defined as risk capital provided outside publicly-quoted markets. Private equity firms invest in established private businesses and take an equity stake—usually over 50%. They also typically participate in the daily management of their investments with the goal of making capital gains or creating value by selling or floating those firms in addition to annual dividend returns.

Unlike venture capital, whose focus is primarily on startups, especially in high-growth areas such as the technology sector, private equity firms tend to invest in well-establish companies. Other differences between these two types of firms would be outside the scope of this article.

In 2018, there was close to $350 billion in global private equity funds.

For investors unsure about which firms will create the most shareholder value in the long-run, exchange-traded funds (ETFs) can offer exposure to a range of firms. However, remember these funds typically have annual expense ratios.

With that information in mind, here are two ETFs that focus on private equity businesses:

1. Invesco Global Listed Private Equity ETF

  • Current Price: $13.02
  • 52-Week Range: $6.55-$13.18
  • Dividend Yield: 6.25%
  • Expense Ratio: 1.59%

The Invesco Global Listed Private Equity ETF (NYSE:PSP) provides access to private equity companies, including publicly-listed firms, business development companies, master limited partnerships as well as other businesses that invest in or lend capital to privately-held companies.

We previously covered bussiness development companies. In the US, master limited partnerships are publicly-traded partnerships that tend to offer high dividends (or cash distributions). By law, they generate over 90% of their income from qualifying operations that are usually in commodities, natural resources, or real estate. (We plan to cover ETFs that focus on master limited partnerships in a separate article).

PSP Weekly Chart
PSP Weekly Chart

PSP, which has 67 holdings, tracks the Red Rocks Global Listed Private Equity Index. The fund started trading in 2006. Net assets under management are close to $180 million.

Close to 31% of the holdings are in the top ten stocks. Manufacturer aerospace components, TransDigm Group (NYSE:TDG), Netherlands-based consumer internet platform Prosus (OTC:PROSF), Switzerland-headquartered global private equity firm Partners Group (OTC:PGPHF), private investment firm Blackstone Group (NYSE:BX), and Australia-based conglomerate Wesfarmers (OTC:WFAFY), whose diverse operations expand leisure firms, home improvement, outdoor living, and energy, lead the names in the fund.

As far as industries are concerned, funds are distributed among financials (64.18%), industrials (14.06%), and consumer discretionary (11.71%), among others. Businesses from the US stand at almost 40%, followed by the UK, Sweden, Switzerland, Netherlands, and Australia, among others.

The fund is up by 1.49% since the start of the year and hit a 52-week high on Dec. 2.

2. ProShares Global Listed Private Equity ETF

  • Current Price: $32.21
  • 52-Week Range: $17.49 - $36.03
  • Dividend Yield: 8.66%
  • Expense Ratio: 3.41%

The ProShares Global Listed Private Equity ETF (NYSE:PEX) offers access to a range of global private equity companies that directly invest in private enterprises.

PEX, which has 30 holdings, tracks the LPX® Direct Listed Private Equity Index. The fund started trading in 2013. Net assets under management are about $17 million, much less than those in PSP.

Approximately 60% of the holdings are in the top ten stocks. Business development company Ares Capital (NASDAQ:ARCC), UK-based private equity and infrastructure investment specialist 3i (LON:III), Canada-based Onex (OTC:ONEXF), (TSX:ONEX), which focuses on private equity investments in the electronics manufacturing and healthcare information technology, and two France-headquartered businesses, private equity and venture capital firm Eurazeo (PA:EURA) and investment group Wendel (PA:MWDP) head the names in the fund.

PEX Weekly Chart
PEX Weekly Chart

As far as industries are concerned, PEX is not as diversified as PSP and financials comprise 94.6% of its holdings.

The ETF is down about 6.5% since the start of the year. Potential investors who are looking for a PE fund may want to study both funds more closely. If we had to choose between the two, we would likely favor PSP at this point.

Looking To Add A Private Equity Stake To Your Portfolio? 2 ETFs Worth Holding
 

Related Articles

Mike Paulenoff
Upward Price Pressure In Retail ETF By Mike Paulenoff - Jun 01, 2021

Back on May 14, with SPDR® S&P Retail ETF (NYSE:XRT) trading at 89.56, we discussed the following technical (and macro) setup with our MPTrader members:  "My conclusion technically...

Looking To Add A Private Equity Stake To Your Portfolio? 2 ETFs Worth Holding

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (4)
Big Nev Paddock
Big Nev Paddock Dec 07, 2020 12:14PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Thanks for the info I am learning a lot..
Unai Casado
Unai Casado Dec 07, 2020 11:55AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
With those expense ratios good luck if you plan to buy and hold for a long time...
Jozef Inselberg
Jozef Inselberg Dec 07, 2020 11:52AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Nice article, thanks. Do you have a twitter account?
Munteanu Daniel
Munteanu Daniel Dec 07, 2020 11:06AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Bună
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email