The IPO market has been an amazingly active space recently. Over the past couple of years, there has been no dearth of high-profile companies that have gone public, especially in the tech sector.
This year has seen plenty of startups take the plunge and exceed expectations. Plant-based hamburger maker Beyond Meat has had a whopping year, while software companies Pinterest, PagerDuty, and Zoom are all trading well above their IPO prices. Recently, Uber surpassed its $45 IPO price for the first time since going public, which could signal that the tide is beginning to turn.
For investors looking at a way to capture the upside of the IPO explosion, as well as any new initiates into the space, the Renaissance IPO ETF (IPO) from Renaissance Capital is a smart way to go.
The ETF tracks the rules based Renaissance IPO Index, which adds sizeable new companies on a fast entry basis and the rest upon scheduled quarterly reviews. Companies that have been public for two years are removed at the next quarterly review.
The Renaissance IPO ETF (IPO) is composed of roughly 50% tech companies, with the generous helpiong communication, real estate, health care, and consumer discretionary stocks as well.
The fund itself is up 27.79 percent year-to-date, making it one of the top ETFs highlighted in a recent segment of CNBC’s “ETF Edge.” Per CNBC, IPO consists of a “basket of 60 of the most recent large IPOs. No surprises here — the IPO market has been red hot this year, bolstered by record highs in the stock market. The average first-day pop of a new issue has been 22% — well above the historic average return of 12-15%. Top holdings include Okta, Spotify, Roku and DocuSign.”
Of course investors need to keep in mind that IPOs do have inherent risks, being new entrants.
“IPO ETFs do cut some of the implicit sector risk, mostly by effective screening measures designed to keep the highest-risk companies out of the funds. But any money poured into an IPO, either directly or through a fund, brings with it a risk element most retail investors may not find palatable,” reports TheStreet.com.
For the second half of the year, investors can look forward to the market heralding a whole new spectrum of IPO contender, including Airbnb, Casper, Cloudflare, Crowdstrike, Peloton, and Postmates.
For more market trends, visit ETF Trends.