Changing the dynamic between public and private markets
Innovations in the ETF space are changing the dynamic between public and private markets, according to VanEck.
On the one hand, public markets provide investors with liquidity and transparency as well as immediate price adjustments but also expose investors to volatility.
On the other hand, private markets can offer high returns due to less competition and the illiquidity premiums but need a long-term investment horizon and have limited liquidity.
But Arian Neiron, chief executive and managing director of Asia-Pacific, believes the ETF space is changing this divide with innovative approaches to indexing. These allow investors to diversify into private markets via a single trade which provides the benefit of increased price discovery and liquidity.
The idea of having an allocation to private markets via a single manager in a listed investment trust or wholesale managed fund is a “dangerous” idea, he said.
“We think innovations in indexing and ETFs are changing this dynamic. Irrespective of which market you invest, diversification remains key. Diversification by names, sectors and managers.
“Because of the disparity of returns among managers in private markets, we would argue manager diversification is more important in private markets. And that is where ETFs are helping investors to access those opportunities.”
VanEck offers both a listed private credit ETF and a listed private equity ETF. The former is a portfolio of the 25 largest companies involved in private credit, while the latter is a diversified portfolio of 50 listed companies that provide exposure to venture capital and buy-out opportunities.
Both track indices calculated by research house LPX Group which allow investors to see the performance of a proxy global private credit or proxy global private equity exposure as well as provide an indication of the overall health of the markets.
AUTHOR
Laura Dew
Recommended for you
Bennelong Funds Management chief executive John Burke has told Money Management that the firm is seeking to invest in boutiques in two specific asset classes as it identifies gaps in its product range.
Responsible investment performance concerns have lessened as the market hits $1.6 trillion in AUM, according to RIAA’s annual report, but greenwashing fears among asset managers are on the rise.
Research by Morningstar has found fixed income funds are bucking a general trend around managed fund fee dispersion with a smaller fee dispersion compared to equity ones.
As investors seek to diversify their portfolios, the naming of bond labels has broadened out to include green, social and impact bonds, according to the annual RIAA report.
