USCF to launch two new private equity ETFs

Nov 30th, 2017 | By | Category: Alternatives / Multi-Asset

USCF has announced it has registered two new ETFs – the USCF SummerHaven Private Equity Strategy Index Fund (NYSE Arca: BUY) and USCF SummerHaven Private Equity Natural Resources Strategy Index Fund (NYSE Arca: BUYN) – that aim to provide investors with the long-term return characteristics of a private equity allocation.

USCF to launch two new private equity ETFs

John Love, president and CEO of USCF.

John Love, president and CEO of USCF, commented: “Since 2006, USCF has provided products to investors that offer easy access to alternative asset classes. We believe in the benefits of wide portfolio diversification, beyond a simple mix of stocks and bonds. The new USCF ETFs that will seek to track SummerHaven’s latest indices are intended to make it easy for investors to access private equity-like long-term profiles at a lower price point than traditional private equity investments.”

BUY will track the SummerHaven Private Equity Strategy Index. The index uses a systematic approach to invest in mid-, small- and micro-cap publicly traded companies with similar characteristics to firms that have historically been acquired by private equity funds.

The methodology is based on the premise that the enterprise multiple (enterprise value (EV) divided by earnings before interest, tax, depreciation and amortisation (EBITDA)) is one of the key variables that private equity funds use to evaluate the attractiveness of a potential investment. A low enterprise multiple indicates an attractive valuation, and this is what the index methodology systematically favours. Contrary to a direct investment in private equity, the index does not employ leverage and provides daily liquidity. The index is rebalanced annually.

BUYN will track the SummerHaven Private Equity Natural Resources Strategy Index. The index uses the same methodology as the above index but only invests in companies involved in the production and use of natural resources.

Ashraf Rizvi, partner of SummerHaven, commented, “We believe that USCF’s new ETFs based on our private equity strategy indices will provide investors with an opportunity to access the returns of an asset class that has traditionally only been available through private markets, with the added benefit of liquidity and transparency and without lockups, vintage risk, investment minimums, or takeover premiums.”

Investors in Europe have two existing options to access private equity returns through ETFs, although both achieve this exposure by holding the shares of listed private equity companies. The iShares Listed Private Equity UCITS ETF (IPRV LN) is the larger of the two with $445 million in assets. The fund was launched in April 2007 and has a total expense ratio (TER) of 0.75%. The other, the db X-trackers LPX MM Private Equity UCITS ETF (XLPE GR), was launched in January 2008 and has $196m in AUM with a TER of 0.70%. Over the past five years, IPRV and XLPE have returned 17.3% and 16.0% per annum respectively.

SummerHaven and USCF have collaborated on three previous ETFs: the United States Copper Index Fund (CPER US), the United States Agriculture Index Fund (USAG US), and the United States Commodity Index Fund (USCI US).

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