The S&P 500 is less than 3% from an all-time high. Six of the 11 sectors are within an all-time high of 5%. However, even though the US stock market index has proven its resilience during a volatile stretch for investors, more money from within the portfolio is expected to move to private companies.
Jan Van Eck, CEO of ETF and mutual fund manager Vaneck, says that rather than seeking an initial public offer, there is a tendency for companies to stay private for a long time, offering new opportunities.
Famous examples include Elon Musk’s SpaceX, Sam Altman’s Openai and Fintech Stripe.
According to Van Eck, allocations to private assets will jump from around 2% to 10% of the current average portfolio retention levels over the coming years.
Some ETFs are beginning to invest a small portion of their assets in stocks in private holding companies, including SpaceX, such as the Ershares Private-Public Crossover ETF (XOVR). Vaneck has launched an ETF that tackles private opportunities differently. It has taken a large position in public equity for investment giants, including private equity companies that own many private companies and other alternative asset managers.
The Vaneck Alternative Asset Manager ETF (GPZ), launched this month, has a portfolio holdings list that includes Brookfield, Blackstone, KKR, Brookfield Asset Management and Apollo, which accounts for almost 50% of the fund. TPG, Ares and Carlisle are also big positions, each in the 5% range.
The new ETF extends existing focus to Vanek’s private market. For over a decade, we have provided investors with access to personal credit through the Vaneck BDC Income ETF (BIZD). It invests in business development companies that lend to small and medium-sized private companies. The ETF has high exposure to the capitals of ARES, Blue Owl, Blackstone, Main Street and Golub, making up about half of the fund. We pay a large dividend of 11%.
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Private investment through publicly available ETFs
“This is a secular trend and we have to believe that there is a higher growth than normal money managers, including ETFs and mutual fund managers,” Van Eck said.
However, he warns that these funds have more volatility compared to the public stock market as a whole. “You have to size it properly,” he added.
