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S&P 500 ETF TRUST ETF (SPY)
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Invesco Global Listed Private Equity ETF (PSP)
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NBI Global Private Equity ETF (NGPE)
Brian asked about private equity on June 25. In your response you mention that private equity is not correlated to other assets. I am looking at the 10 year performance of PSP vs. SPY and their charts move up and down in almost perfect parallel (pre-COVID run ups, COVID crashes, post-COVID run ups, etc.), with PSP returning 93% and SPY 234%. On a 4-5 year time scale, PSP/SPY/NGPE move up and down in parallel as well. I am struggling to find a reason to invest in a private equity ETF based on this. Is it because an ETF, regardless of what it is investing in, is in fact correlated since it is traded like any other equity?
Thank you for all the great information your provide, Michael
Private equity does have market risks, and is not a perfect diversifier. Much depends on timeframe chosen when looking at correlation, and also what is used as metrics. PSP owns a collection of private equity companies, many of which are listed, so it will have a higher degree of correlation as its stocks will see the same influences as the market. Though correlation may be less so on fundamentals but any traded security will see some similarity to the market. PSP in fact has a beta very similar to SPY. Performance comparisons may not be perfect, though, as PSP only has 40% exposure to the US, so performance has lagged for that reason. Most discussions on private correlation relate to private companies and not listed ETFs. This article may add some colour.
Authors of this answer, directors, partners and/or officers of 5i Research and/or affiliated companies have a financial or other interest in SPY.