United States Commodity Fund Investments is branching further away from its core commodity theme with two new exchange traded funds that help make it easier to access private equity strategies.
On Friday, United States Commodity Fund launched the USCF SummerHaven SHPEI Index Fund (NYSEArca: BUY) and the USCF SummerHaven SHPEN Index Fund (NYSEArca: BUYN), which both have a 0.95% expense ratio.
“However, the Index does not include, and the Fund does not invest in, private equity funds or private equity of companies,” according to USCF.
Both new funds track newly developed indices based on the research of Harvard Business School Professor, Erik Stafford. The indices are based on Stafford’s 2017 paper titled Replicating Private Equity with Value Investing, Homemade Leverage, and Hold-to-Maturity Accounting, which argued that an investor is able to reproduce private equity returns by picking out a portfolio of publicly-traded equities with similar characteristics to the companies that private equity firms are likely to target for investment.
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“With BUY and BUYN, investors can access the type of strategy that historically has been offered by private equity firms to a more limited group of investors in higher cost vehicles,” John Love, President and CEO of USCF, said in a note. “Now, we have developed ETFs that increase access for investors to returns intended to be similar to those of private equity strategies – another alternative asset class that traditionally has been unavailable to retail investors. BUY and BUYN – provide investors with a new way to diversify along with the liquidity, efficiency, and cost benefits attributable to ETFs.”
BUY tries to reflect the performance of the SummerHaven Private Equity Strategy Index, which attempts to replicate the long-term (i.e., 10 years or more) return characteristics of diversified private equity allocations, according to a prospectus sheet. The fund utilizes a proprietary methodology that focuses on companies with low enterprise value to earnings before interest, taxes, depreciation, and amortization (“EV /EBITDA”) ratios; low net equity issuance; low market capitalization; and moderate profitability. The underlying index includes the greater of 200 companies or 20% of such investable universe and is equally-weighted and rebalanced annually.
BUYN tries to reflect the performance of the SummerHaven Private Equity Natural Resources Strategy Index, which attempts to replicate the long-term return (i.e., return over 10 years or longer) of diversified natural resources private equity allocations. The fund implements a proprietary methodology that targest companies with low enterprise value to earnings before interest, taxes, depreciation, and amortization (EV / EBITDA) ratios; low net equity issuance; low market capitalization; and moderate profitability. The ETF includes the greater of 80 companies or 40% of such investable universe and is equally-weighted and rebalanced annually.
For more information on new fund products, visit our new ETFs category.