Accessing Private Equity-Like Returns on a Budget

Activity in the private-equity funds space is heating up, and the average investor can also access this segment of the market and buy investments only the wealthiest could traditionally afford through an ETF.

On the upcoming webcast Thursday, Aug. 16, Accessing Private Equity-Like Returns on a Budget, John Love, President and Chief Executive Officer of USCF, and Erik Stafford, John A. Paulson Professor of Business Administration at Harvard Business School, will delve into the private-equity space and hone in on a fund strategy that attempts to replicate the long-term return characteristics of diversified private equity allocations.

Specifically, the USCF SummerHaven SHPEI Index Fund (NYSEArca: BUY) and the USCF SummerHaven SHPEN Index Fund (NYSEArca: BUYN) can help make it easier to access private equity strategies.

Both new funds track newly developed indices based on Stafford’s research. The indices are based on Stafford’s 2017 paper titled Replicating Private Equity with Value Investing, Homemade Leverage, and Hold-to-Maturity Accounting, which argued that an investor is able to reproduce private equity returns by picking out a portfolio of publicly-traded equities with similar characteristics to the companies that private equity firms are likely to target for investment.

BUY tries to reflect the performance of the SummerHaven Private Equity Strategy Index, which attempts to replicate the long-term (i.e., 10 years or more) return characteristics of diversified private equity allocations, according to a prospectus sheet. The fund utilizes a proprietary methodology that focuses on companies with low enterprise value to earnings before interest, taxes, depreciation, and amortization (“EV /EBITDA”) ratios; low net equity issuance; low market capitalization; and moderate profitability. The underlying index includes the greater of 200 companies or 20% of such investable universe and is equally-weighted and rebalanced annually.

On the other hand, BUYN tries to reflect the performance of the SummerHaven Private Equity Natural Resources Strategy Index, which attempts to replicate the long-term return (i.e., return over 10 years or longer) of diversified natural resources private equity allocations. The fund implements a proprietary methodology that targest companies with low enterprise value to earnings before interest, taxes, depreciation, and amortization (EV / EBITDA) ratios; low net equity issuance; low market capitalization; and moderate profitability. The ETF includes the greater of 80 companies or 40% of such investable universe and is equally-weighted and rebalanced annually.

Financial advisors who are interested in learning more about private equity allocations can register for the Thursday, August 16 webcast here.