Private Equity Comes to the Masses

Private financiers and multibillion-dollar private mega-deals are hogging the market spotlight, and retail investors can soon get in the game with an exchange-traded fund tracking private equity investments.

ETF provider PowerShares has a slate of 40 ETFs under registration, including the PowerShares Listed Private Equity Portfolio ETF, which is expected to hit the American Stock Exchange in mid-October.

The ETF will track a private equity index that was recently created by Denver investment adviser Red Rocks Capital Partners. The new index is a benchmark of about 30 publicly traded companies that invest in businesses that participate in private equity, including private equity firms, business development companies and banks that put the lion's share of their capital into private companies.

"This is an asset class that people wake up every day and hear about ... clearly it is now part of the business vernacular of both retail investors who better understand what private equity is about and of financial consultants and high-net worth folks who don't have access to the partnerships they would need to access this asset class," says Mark Sunderhuse, managing partner and co-founder of Red Rock Capital Partners.

Private equity firms have been grabbing an increasing amount of headlines as the size of buyout deals escalates. This summer saw hospital company HCA(HCA) agree to a record-setting $33 billion private equity buyout. Most recently, Freescale Semiconductor (FSL) was rumored this week to be targeted for a $16 billion private equity takeover, which would eclipse SunGard Data Systems as the biggest tech going-private deal.

But the average investor can't access private equity firms. Most stipulate that investors be accredited, meaning that they have a net worth of at least a million dollars. In addition, they often require investors to keep their money invested for long periods of time.