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Private Equity Is Invested In Facebook; How You Can Be Invested In Private Equity
By Market News Video Staff, Wednesday, June 29, 3:37 PM ET
Over the last few months, financial news networks have focused their attention on the increasing number of IPOs being brought to market by private equity investors. LinkedIn (NYSE:LNKD) saw its stock more than double on the first day of trading while Pandora (NYSE:P) watched its shares soar as well. And in the pipeline for future IPOs, the market is looking forward to Groupon, Facebook and now Zynga.
Generally speaking, retail investors do not have access to these types of deals directly, but can invest in publicly traded private equity companies. These include companies like American Capital (NASDAQ:ACAS), Apollo Investment Corporation (NASDAQ:AINV), Fortress Investment Group (NYSE:FIG), Ares Capital (NASDAQ:ARCC) and Fifth Street Finance (NASDAQ:FSC).
Not all publicly-traded private equity companies are equal, however. Ares Capital has earned investors a 10% annual return over the last 4.5 years with dividends reinvested, while American Capital has lost investors more than 20% over the same time period with dividends reinvested.
Furthermore, investors can expect vastly different yields from the sector based on how the companies are organized. Business development companies are required by law to pay out a minimum of 90% of their investment company income to shareholders in the form of dividends, while asset managers are not held to the same standard. One example of this would be the Fortress Investment Group which once again has elected to retain its earnings to pursue future investment opportunities.
Investors wanting to add private equity exposure to their portfolio can look to the PowerShares Listed Private Equity ETF (AMEX:PSP) for diversification and income. This ETF holds sixty different private equity companies that trade on both the US and global exchanges and yields almost 3%. For a complete view of the holdings, visit the PSP Holdings page on ETFChannel.com
The ETF Channel Flexible Growth Investment Portfolio is designed to seek growth for investors — anywhere and everywhere. The key to the program is our portfolio strategy allows us complete flexibility in terms of asset allocation as there are no predetermined guidelines as to the level of stocks, bonds, cash, regions, countries, sectors, commodities, or even asset classes in the portfolio! In short, this is a completely flexible portfolio designed to follow the performance trail wherever it leads us.
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