I wrote an article
about the then-newly listed
PowerShares Listed Private Equity Portfolio
that tracks the Red Rocks Listed Private Equity Index.
I was generally skeptical about whether a fund with a bunch of different companies specializing in different types of deals could offer returns that capture a private-equity effect.
My concern was that the specialties of each of the holdings would be blended away, and the result would look a lot like the market.
Private equity was a hot area last fall and has become even hotter since as the pace of new deals seems to have accelerated, so I felt it would be worth revisiting this area to see whether my skepticism was well-founded.
Private Equity vs. the Market
As the first chart shows, PSP has clearly outperformed the
and the Russell 2000, but I'm not sure that the incremental outperformance has been a bonanza of private-equity riches.
PSP is heaviest in mid-cap value stocks.
iShares Russell Mid-Cap Value Index Fund
as a benchmark (second chart), you can see that PSP has lagged slightly since its inception.
(Please see charts below.)