Last week we highlighted fund inflows and bullish call buying in the financial sector, mainly via XLF (SPDR Financials). A financial subsector that likely does not come to mind instantly for most ETF investors at this point yet is that of private equity.
Most managers are used to accessing private equity exposure via private placements or fund of funds type vehicles, as this has largely been an “institutional only” place of access for literally decades.
PSP (PowerShares Global Listed Private Equity Index) recently celebrated its fifth anniversary, as it debuted in October of 2006. The fund owns anywhere between 40 to 60 individual equities that are listed publicly that are engaged in the business of investing and lending capital to privately held companies (thus private equity investments).
Some of the holdings include ADRs and GDRs, as the exposure is truly global and not limited to U.S. based companies. The fund may also hold swaps that are tied to exposure to private equity names, as currently the top holding are Citi Total Return Swaps that give exposure to the Blackstone Group LP, a well-known private equity player (4.68% weighting). The next 4 top holdings are Ratos AB (4.27%), Leucadia National Corp. (4.27%), HAL Trust (4.11%), and Onex Corp. (4.00%).
Since inception, it has been tough sledding for this fund, as returns were decimated during the 2008-2009 financial crisis amidst considerable de-leveraging across the space, and private equity deals are often funded with significant leverage in times of conducive policies and environments.
Since inception, the fund has lost 68.06%, and is currently bumping up against its 50 day moving average after falling through this level last Thursday. With any sustained rally in the broader financials sector, this ETF will likely see strength in sympathy, but if financials do falter as they did in mid-November after a “head-fake” rally, PSP should be expected to retest recent lows.
PowerShares Global Listed Private Equity Index
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