New Private-Equity ETF Has Limits

I don't know if private equity is a mania or a bubble. I don't know if it is inflating, deflating, popping or anything else. But I do know that PowerShares just listed its second private-equity exchange-traded fund, the International Listed Private Equity Portfolio (PFP Quote), and I suspect it suffers from some of the same flaws as the first one.

The difference between PFP and the older PowerShares Listed Private Equity Portfolio (PSP Quote) is that PSP invests in the U.S. and PFP invests overseas, so it captures a slightly different slice of this universe.

I have written a couple of skeptical articles about PSP since it listed. The drawback I see to investing in a variety of private equity firms that specialize in different types of deals is that the individual characteristics of the component companies get blended away. That's going to limit its effectiveness in diversifying your portfolio. And the real appeal of private equity is its low correlation to stocks. ...