COVID-19 has certainly changed the landscape of the capital markets and private equity is not any different. Nonetheless, there are still opportunities to be had in private equity that can’t be accessed in publicly-traded investments and a Joe Biden-Kamala Harris administration could propel the Invesco Global Listed Private Equity ETF (PSP) to new heights.
PSP is based on the Red Rocks Global Listed Private Equity Index. The Fund will normally invest at least 90% of its total assets in securities, which may include American depository receipts (ADRs) and global depository receipts (GDRs), that comprise the Index.
The Index includes securities, ADRs and GDRs of 40 to 75 private equity companies, including business development companies (BDCs), master limited partnerships (MLPs) and other vehicles whose principal business is to invest in, lend capital to or provide services to privately held companies (collectively, listed private equity companies). The Fund and the Index are rebalanced and reconstituted quarterly.
While it has been a rough year for private equity, as an IPE article noted, “COVID-19 has, of course, also been a catalyst for more investment opportunities in technological advancements.” With hardship comes opportunity and private equity firms that can locate investments that can thrive through the pandemic stand to benefit the most.
Where are these opportunities at the moment? Healthcare is certainly one of them.
“These include pandemic-related healthcare, with many innovations not specific to COVID-19,” the article added. “However, they are essential in fighting future pandemics and other healthcare-related challenges. There is a structural and possibly permanent shift toward remote access in areas such as work, schooling and healthcare.”
Another theme that is poised for growth is environmental, social and governance (ESG) investing.
“The Biden-Harris administration is also expected to set up the first National Climate Council, a high level group whose chair would influence and direct a mandate of climate-related policies across the US government,” a Private Equity News article said. “The implementation of these promises will be a dramatic shift from the position of President Trump, who has weakened environmental rules across the board by overturning more than 100 major environmental regulations.”
“Private equity funds can expect many of these regulations to be reinstated, potentially with further rules to reduce carbon emissions,” the article added. “Portfolio companies affected by these regulations may benefit from undertaking an analysis of the likely impact on their operations and budgets. Portfolio companies with sustainable business models will likely perform well under a Biden administration.”
Of course, PSP also gives ETF investors added diversification to complement their funds that already invest in public equities. Getting access to these private deals that were once only open to a select few accredited investors is now easier via funds like PSP.
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