This Alt ETF Taps Public Stocks for Private Equity Exposure

Alternative strategy investment managers PEO Partners and AlphaQuest have joined forces to launch an exchange-traded fund designed to manage market volatility, including leveraging equity performance when opportunities arise.

The PEO AlphaQuest Thematic PE ETF (LQPE), which began trading last week, is an actively managed fund that combines equity and derivatives strategies.

Randy Cohen, co-founder of New York-based PEO Partners, explained that the equity strategy focuses on public companies that align with certain investment themes and characteristics of traditional private equity funds focused on leveraged buyouts.

“We believe the strategy will deliver a distinctive investment performance with the potential for long-term capital appreciation, but manageable drawdowns during market upheavals,” Cohen said.

Public Stocks to Mimic Private Equity

Unique about this strategy is that PEO doesn’t actually invest in private equity, but instead studies private equity investing patterns and invests in public companies to gain comparable market exposures.

“We’re essentially copying what private equity does, but in the public markets,” Cohen said.

For its part, New York-based AlphaQuest uses a hedging overlay strategy to help manage portfolio volatility.

With an expense ratio of 1.25%, LQPE is on the pricier side, which is what one might expect when more complex strategies are employed.

On that note, Cohen said 1.25% pales in comparison to the fees charged by private equity managers, which typically include a 2% management fee and a fee equal to 20% of portfolio performance.

The ETF will use futures contracts to enhance equity market exposure, but the strategy is also designed to reduce downside volatility. Combined, the equity and derivatives strategies are targeting returns that match or exceed that of the Russell 2500 Index with lower volatility.

The launch of LQPE, which offers investors and financial advisors more direct access to an asset class typically viewed as less-correlated to the broad equity markets, comes amid a period of growing uncertainty in the financial markets, as witnessed by a second consecutive Monday of extreme market volatility.

A week ago, it was a new threat from artificial intelligence upstart DeepSeek taking on US companies leading that category. This week, it was uncertainty surrounding President Donald Trump’s scheduled tariffs on several US trading partners, including Mexico and Canada.

LQPE represents the latest example of asset managers wrapping alternative investments inside exchange-traded funds, further expanding the democratization of alternative strategies.

“We don’t do everything [price-to-earnings ratio] does, but if we can offer a lot of the things PE does that is so beneficial,” Cohen said. “For people who can’t invest in private equity, we try to make that kind of performance profile available to them.”