Best Private Equity ETFs

Exchange-traded funds (ETFs) have taken off in recent years. Investors enjoy being able to diversify their portfolios instantly with a single stock exchange transaction. However, the overwhelming majority of ETFs only cover publicly held companies — they omit private equity investments that could be lucrative.

Lately, a handful of private equity funds have emerged. These funds invest in private companies whose shares aren’t available on the stock exchange. While these private equity ETFs present more risk than public ones, the corresponding profits and dividend yields can be substantial.

These private equity funds may be hard to find, but the possibility of great revenue makes them worth seeking out.

5 Best Private Equity ETFs

Here are five of the top private equity funds investors can buy into. 

1. Invesco Global Listed Private Equity Portfolio (NYSEARCA: PSP)

Invesco is one of the biggest public or private equity firms in the world. Its Global Listed Private Equity Portfolio is arguably the most visible private equity ETF in the entire investment market. The Invesco fund tracks commodities on the Red Rocks Global Listed Private Equity Index.

As of July 2023, the Invesco fund’s assets under management (AUM) total over $230 million. The top holding in the PSP fund is Blackstone Ltd., the biggest private equity investment company in the world.

With a dividend yield of 2.61% and an expense ratio of 1.34%, investors can expect consistent profits with modest fees. After coming down from a COVID-era boom, PSP’s share price has settled in the $40 to $56 range.

2. ProShares Global Listed Private Equity ETF (PEX)

The ProShares ETF tracks companies on the LPX Direct Listed Private Equity Index. According to LPX, it “reflects the entire spectrum of the private equity investment universe.” At around 10%, the top holding in PEX is Information Services Group, a tech research firm.

The PEX fund has had its fair share of publicity in recent months. Its dividend yield has gone off the charts, nearing 10% at points in the last couple of years. Currently, that yield is settling close to 6.5%, which is still remarkable.

The expense ratio is a little higher at 2.81%, but its market value has been relatively consistent over the last 10 years. As of July 2023, its share price is hovering around $28, staying between $23 and $29 for the past 52 weeks.

3. iShares Listed Private Equity (IPRV.AS)

All iShares funds are managed by investment giant BlackRock, the biggest overall investment firm in the world. Its Listed Private Equity ETF tracks the S&P Listed Private Equity Index. Like the Invesco ETF, the iShares fund’s biggest holding is Blackstone, Ltd. In fact, 85% of IPRV.AS holdings are in the financial sector.

The assets under management for this fund are worth around $870 million. The expense ratio is 0.75%, with semi-annual dividends yielding 3.81%. In July 2023, shares in this fund were priced at around $23.

4. VanEck BDC Income ETF (NYSEARCA: BIZD)

This ETF is managed by the global firm VanEck. It tracks the ​​MVIS US Business Development Companies Index (MVBDCTRG), which exclusively lists the “largest and most liquid business development companies.” The value of its AUM, as of July 2023, is over $655 million.

Distribution in the BIZD fund is a little broader than the other ETFs on this list. Its top holding, Ares Capital Corp ARCC, commands nearly 20% of the entire fund.

The VanEck fund’s expense ratio is unusually high at 10.96%, but its 30-day yield is also impressive at 10.6%. It’s also one of the cheaper funds to buy into, priced at around $15 a share in July 2023.

5. FlexShares Listed Private Equity UCITS ETF (FLPE)

The FlexShares ETF is heavily traded in Europe, though it has a presence on New York stock exchanges as well. It tracks the Foxberry Listed Private Equity SDG Screened index, which follows private equity firms all over the world. 

The FLPE ticker lists several divisions of the overall fund based on location: FLPE.DE for Germany, FLPE.AS for Amsterdam, etc. All of the funds currently have a per-share price in the $18 to $19 range. Its holdings total just under $200 million, with Apollo Global Management and Blackstone as the top two.

The FLPE takes long positions only, and the expense ratio is 0.40%.

What Is a Private Equity ETF?

A private equity ETF is a packaged fund that focuses exclusively on private companies not normally available to consumers or individual investors.

Investing in these companies is more speculative — not being in the public market, they’re not very well-known. But they’re on the radars of top institutional and high-earning investors around the globe, who often anticipate great profit potential.

Like publicly traded ETFs, private equity ETFs are a means of instant portfolio diversification. Investors gain exposure in multiple types of companies, which is generally a good idea for managing risk.

Are Private Equity ETFs Really Private?

Many of the companies funded by private equity ETFs (Blackstone chief among them) only deal with private commodities. In turn, many of the small companies they fund are in the early-to-mid-stage range of development.

These businesses are typically funded by angel and institutional investors since they’re not on the stock market. In that sense, these funds are private.

Why Private Equity ETFs May Be a Good Investment

Private equity funds are all about potential. They represent businesses and sectors still in the development phase. Unlike public commodities on the stock market, there’s not too much in the way of track records for these companies. However, they’re speculated as having a great shot at turning profits.

If an investor gets in early on these companies, they could see substantial profit in the long term — early investors stand a lot to earn from them, especially if the company successfully goes public.

Though nothing is guaranteed in this volatile marketplace, private equity ETFs can prove to be solid investments.

Where to Invest in Private Equity ETFs

You should be able to use your brokerage account to get into the private equity market. Charles Schwab and Fidelity, for example, offer their customers the chance to purchase shares in private equity ETFs.

Given the nature of funding startups, which is largely the domain of institutional and super-wealthy investors, your brokerage may set a minimum for account balance or trading volume to invest in private equity firms. Contact your brokerage to find out.

Private Equity ETFs: Possible Roads to Wealth

Private equity ETFs are just a sliver of the overall ETF market. But with the exclusivity, wealthy backers and long-view orientation of private equity ETFs, they can be a way to generate wealth if you can get and stay in.

They may require patience and strong risk tolerance to pay off, but they can generate life-changing profits if they do.

Frequently Asked Questions

Best Private Equity ETF Methodology

The private equity ETFs evaluated here reflect a few important factors, namely:

• Market capitalization
• Total value of held assets
• Expense ratio
• Dividend yield
• Share prices over ETF’s existence