Private Equity Comes to the Masses

But ETFs can be traded just like a stock, eliminating the problem of liquidity, and any retail investor, no matter their net worth, has access to the product.

"The whole idea is to bring private equity to the masses," Sunderhuse says.

Unlike private-equity funds, which offer little transparency into their holdings, ETF investors will know what they're buying.

Moreover, the components of the index that the ETF will track are all publicly traded companies, so their prices are set by the market. Private companies in and of themselves would be nearly impossible to price once daily, much less throughout the day like a stock.

The ETF's overall expense ratio will be capped at 0.60%.

Index Breakdown

For a stock to make the Listed Private Equity Index, it must have a majority of its assets invested in or exposed to private companies, domestic or foreign, and have a market cap of at least $50 million.

The companies are diversified by stage, from early-stage venture capital to late-stage recaps, mezzanine financing and debt offerings, as well as by industry and sub-industry.

Red Rock says it won't divulge the initial components of the index until the Amex publishes the Listed Private Equity Index, expected by the end of September.

Adam Goldman, Red Rock co-founder and managing partner, emphasizes that the index will not leave out a sector or a subsector. It will include publishing, leisure, retail, biopharma, aerospace, materials and health care, though it will change as the portfolio is rebalanced.

"The index, even though it only has 30 or so names, will represent well over 1,000 different investments," says Sunderhuse.

>To order reprints of this article, click here: Reprints