These Private Equity ETFs Just Don't Quite Cut It For Me

There was an interesting post from IndexUniverse that I found on Seeking Alpha by Matt Hougan about six intriguing asset classes available via ETFs.

The six Matt cited are international small cap, China, Japan, bonds, themes (like timber and water) and the last one was more of what might come in the future, as opposed to current ETFs, and here he cited maybe a 130/30 or a market neutral fund.

I think the investment product evolution we have been witnessing in the last few years is leading to retail investors (whether they are on their own or hire someone) being able to assemble portfolios in the same manner as pensions and endowments.

Currency is an asset class. Infrastructure is an asset class. Absolute return is an asset class. Private equity is an asset class.

I've been writing favorably about using currency and infrastructure for a while, and I have written about absolute ideas a few times though probably more in terms of exploration, but I have not been a fan of private equity products. PowerShares has two private equity ETFs: Listed (PSP) and International Listed (PFP). I wrote about both of them for TheStreet.com and concluded that these were more like proxies for the financial sector as opposed to actually capturing private equity.

There is a closed end fund that is kind of in the ball park but I am not sure what to make of the result. You might remember the MVC Capital Fund (MVC). Originally it was an exchange traded product [CEF] that was to provide direct access to a venture capital fund. It floundered for years, had some controversy and now may have righted the ship. So maybe it took six years or so before righting itself. If you look at the holdings it seems like it is more like a pool of capital as opposed to a company that benefits from managing a pool of capital like most of the contents of PSP and PFP. To be clear I don't own MVC nor have I studied it.

The ultimate goal of this sort of study, as I see it, is smoothing out the ride where possible. Invariably if this evolves the way I think it will, there will be people who misuse these products and blow themselves up. It happened with tech, and, judging by emails and blog comments, people have made similar, albeit generally less dire, big bets on emerging markets and Canadian royalty trusts.

I make a point of reiterating moderation with anything, and that will go for whatever great thing might be coming.