Liquid private equity opens-up high-performing asset class

Opportunities only the private equity market can offer have been unlocked and captured by global ETF provider VanEck.

The ETF provider has stepped into the private equity space with a focus on unlocking investment opportunities in start-ups, buy-outs, and project financing. Van Eck will soon list the Global Listed Private Equity ETF (ASX: GPEQ).

According to Van Eck, “GPEQ will give you the opportunity to invest alongside the smart money, gaining access to the start-ups, the buy-outs, and the project financing. You could potentially access the next Afterpay, Google, eBay or AirBnB before they list on the stock market.”

GPEQ will be the first Australian private equity ETF to list on the ASX and will track the LPX50 Index that includes 50 listed private equity companies. The companies the ETF will hold comprise the 50 most highly capitalised and liquid listed direct, indirect, and private equity managers.

The companies will gain their exposure to private equity either:

• Directly, that is the company invests directly in private equity (PE) from its own balance sheet;
• Indirectly, by investing into private equity funds; or
• They are the private equity managers themselves

Why private businesses?

According to Reuters, “private equity groups have embarked on a spending spree on assets around the world in the last six months, flush with cash after they largely sat out the pandemic.”

This positive momentum is expected to continue through 2021 for PE firms. The entire sector is benefiting from tailwinds created by historically low interest rates as well as record fund-raising. The resilience of the recent rebound suggests that investors are increasingly looking to private markets for higher potential returns.

The private sector has become increasingly popular because the pool of companies and number of investment opportunities are far greater than that of the public market. This often means the quality of businesses compared to listed peers can be far better, with completely aligned management and lower levels of investor participation. Private businesses aren’t exposed to the complexities of an open market; they have far greater flexibility, room to grow exponentially and decisions are made with a long-term focus rather than short-term shareholder profitability.

What was once an inaccessible investment class is being made accessible to all investors. Not just large high-net-worth investors, but investors of all forms. Private equity investors have provided capital to companies to:

Some of the largest corporate turnarounds and biggest profits have come on the back of private equity deals.

GPEQ allows Australian investors to easily include private equity in the “alternatives” allocation of their portfolios, by buying one listed stock.

Ishan Dan

Ishan is an experienced journalist covering The Inside Investor and The Insider Adviser publications.