New Pacer ETF Tracks Private Equity, Venture Capital
The Pacer PE/VC ETF is the second ETF in a week to bring private assets to retail investors.
Pacer ETF Distributors’ latest addition to its ETF lineup appears well-suited for a market environment adjusting to increasing volatility.
The Pacer PE/VC ETF (PEVC), which started trading Tuesday morning, is designed to provide retail-class investors with exposure to the kinds of investments that have historically been reserved for wealthy individuals and institutions.
PEVC is a rules-based strategy designed to replicate the risk and return characteristics of the FTSE PE/VC Index, which tracks private investments.
The ETF will hold about 200 publicly traded companies that will replicate the performance of the index without directly investing in any private investments, said Sean O’Hara, president of Pacer ETFs in Malvern, Pennsylvania.
Putting Private Assets in a Public ETF
The tracking of the public companies that replicate the FTSE PE/VC Index is handled by DSC Quantitative Group in Chicago, which has been replicating the private investments index for a decade and tracking it at a 99% rate, said O’Hara.
If the ETF strategy sounds familiar, it might be because it follows by about a week the debut of the PEO AlphaQuest Thematic PE ETF (LQPE), which also invests in public companies to replicate the performance of private investments.
O’Hara said that while PEVC opens access to an investor universe that has not always been able to invest in private equity, the ETF format is also likely to gain favor among traditional private equity investors.
“If you’re an advisor or asset allocator, this is a way to get private equity returns without the illiquidity and higher fees,” he said.
At 85 basis points, PEVC is on the high side for an index-based ETF but is considerably less expensive than standard private equity investing fees that include a 2% management fee and 20% of the investment performance.
“PEVC bridges the gap between the exclusivity of private equity and venture capital with the accessibility of ETF products,” O’Hara said.
Pacer manages 48 ETFs that combine for more than $44 billion.
