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Tuesday, October 24, 2006

ETF Launching to Track Private Equity

Private Equity can now be somewhat traded as an ETF, an exchange traded fund. PowerShares, distributed by A I M, is launching an ETF based on private equity. The ticker on the American Stock Exchange will be listed as "PSP" and the formal names is The PowerShares Listed Private Equity Portfolio. It is based on the Red Rocks Listed Private Equity Index.

The ETF comprises of companies whose principal operations are investing in and lending to privately held companies. They have to have a minimum market capitalization rate of $50 million and a closing price above $1.00. It is diversified from 3 perspectives: stage, capital structure, and industry focus. They also consider valuation metrics, financial data, historical performance, and diversification.

The Listed Private Equity Index is noted to have a correlation coefficient of 0.703 to the S&P 500 Index over the last 10 years. The dividend yield on the index in the last 12 months was noted as roughly 5.15%, but that number also includes special dividends.

Jon C. Ogg
October 24, 2006
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