This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Private-Equity ETF Poses Some Problems

When it debuted in late October, the PowerShares Listed Private Equity Portfolio (PSP) generated a lot of excitement.

That's because it was the first exchange-traded fund to give investors exposure to stocks whose main business is to invest in or lend money to privately held companies. Everyone seems to have a strong opinion as to whether this is a good idea.

So when one of the ETF's holdings, Utek (UTK), plummeted almost 40% on Oct. 26, just days after the ETF launched, industry observers took note. But it wasn't because the stock's decline had a big impact on the ETF. In fact, Utek accounted for only about 0.75% of PSP's portfolio at the time, and the ETF managed to close higher that day.

It was a bit of wake-up call though, reminding investors that they need to check what securities underpin an ETF before plunging in. Many say this is particularly true with the private-equity ETF, as there are some other questionable holdings and the ETF may not be exactly what it claims to be.

"Any ETF has the risk of having one of its components blow up like that," says J.D. Steinhilber, founder of AgileInvesting.com, an investment advisory subscription service that provides advice on managing portfolios with ETFs. However, he says the private-equity ETF, which has just 34 holdings, is more concentrated than most. That makes it more susceptible to a big decline in an individual stock.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
CSE $15.50 -0.51%
ACAS $13.15 0.00%
ALD $44.48 0.00%
CSWC $46.69 0.00%
GLAD $7.74 0.00%

Markets

Chart of I:DJI
DOW 17,630.27 +189.68 1.09%
S&P 500 2,093.25 +25.61 1.24%
NASDAQ 5,089.2060 +49.43 0.98%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs