Market Overview

Play The Private Equity IPO Boom With This ETF


Alright, so the first quarter wasn't exactly bustling with IPO activity, but it appears the pace of new offerings is set to pick up and that likely means plenty of more IPOs backed by private equity firms. And that could mean this is a fine time to take a look at the PowerShares Listed Private Equity ETF (NYSE: PSP).

Consider this: In the first quarter, only 11 of 26 IPOs were backed by private equity firms but they accounted for $10.9 billion of the $14.9 billion raised, according to Thomson Reuters data. Some of the big names of that group included HCA (NYSE: HCA), Kinder Morgan (NYSE: KMI) and BankUnited (NYSE: BKU).

There's more to come with Dunkin Brands and Toys R Us expected to sell shares to the public later this year, perhaps indicating investors' appetite for buyout-backed IPOs is strong.

So why not have a look at PSP, which has $460.6 million in assets under management? While the ETF devotes almost 40% of its country exposure to the U.S., it offers plenty of exposure to Europe and will get you involved with some of private equity's heavy hitters including Blackstone Group (NYSE: BK), Leucadia National (NYSE: LUK) Ares Capital (Nasdaq: ARCC) and KKR (NYSE: KKR).

The boom in private equity IPOs and PSP's holdings are far from the only reasons to consider PSP. In fact, the most compelling reason may be the returns, as it should be.

Once again, consider this: In the past six months, PSP has outperformed the Financial Select Sector SPDR (NYSE: XLF), the SPDR KBW Insurance ETF (NYSE: KIE), the iShares Dow Jones US Broker-Dealers Index Fund (NYSE: IAI) and shares of Goldman Sachs (NYSE: GS).

Bottom line: PSP looks like one of the best financial services ETFs out there and easily the best way for an average investor to get exposure to private equity and that's not a bad combination.

Posted-In: Long Ideas News Sector ETFs Short Ideas Specialty ETFs Offerings Pre-Market Outlook Intraday Update


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