Barclays Global Investors will launch on Tuesday the first exchange traded fund based on S&P’s Listed Private Equity index, which was itself unveiled only a week ago, the FT reports.
BGI’s initiative comes just a week after Société Générale unveiled a structured exchange traded note based on the rival Dow Jones Private Equity Index.
“We are seeing a lot of demand from people to get quick access to private equity,” said Jennifer Grancio, head of distribution at BGI.
Srikant Dash, index strategist at S&P, said the index approach had several advantages over the traditional method of investing in a given private equity fund. “With a fund there is no liquidity and your money is locked up. With the listed approach there is daily liquidity in the stock market.”
“And middle market and small investors may not have access to private equity funds, which are typically only open to large investors. With listed private equity there is no such barrier,” he said.
But one limitation of S&P’s approach is that the bulk of the private equity industry consists of unlisted partnerships. SocGen said the Dow Jones index represented 7 per cent of the industry, while S&P said its index, which contains 25 stocks, represented “less than a quarter”.
ETFs can be easily traded like stocks and often carry lower fees than their alternatives. While early ETFs tracked traditional stock market indices, the sector has now broadened to include commodities, precious metals and more complex stock portfolios. ETFs can also be sold short making them a valuable tool for hedge funds.
BGI has been expanding its ETF platform with the launch of what is believed to be the world’s first ETF shadowing the infrastructure sector and is also planning a US property index ETF.
