When nested within a comprehensive and well-rounded portfolio, private equity and venture capital are often seen as the Holy Grail of diversified investing. Though illiquid and with a few other negative traits, private equity and venture capital investing offer uncorrelated assets and, with venture capital specifically, access to tomorrow’s biggest companies before they go public—if they ever do.
Of course, the drawback to private equity and venture capital for retail investors is sheer accessibility. Restricted to specific investor classes with high minimum investment amounts and net worth or income requirements, most retail traders simply can’t get their hands on the truly 10x investment opportunities that private equity and venture capital offer.
Until now.
These three tradable assets — one mutual fund, one “standard” stock, and one ETF — offer retail investors access to private equity and venture capital investment opportunities otherwise untouchable (alongside their significant upside potential).
ARK Venture Fund (ARKVX)
ARK Venture Fund (MUTF:ARKVX) is a fairly new venture capital investment strategy targeted to retail traders from the office of legendary growth investor Cathie Wood. Wood’s new venture fund, which today is only accessible via SoFi (NASDAQ:SOFI) or the Titan investment app, offers traders a range of investment options otherwise inaccessible to retail. Before looking at those, a quick acknowledgment that investing in this fund is expensive relative to other mutual funds or ETFs. Right now, the fund’s net expense ratio sits at 2.90%, or $290 on a $10,000 investment. That ratio accounts for a temporary expense reimbursement expected to close in November. Once the reimbursement window ends, the total expense ratio will climb close to 6%.
Still, for growth-minded retail investors, a single-digit expense ratio is nothing compared to the upside potential of Cathie Wood’s portfolio companies. Top picks include SpaceX, OpenAI, and X. For more niche interests, the fund also invests in Replit, Discord, and Flexport.
Cathie Wood got a lot of flack post-ZIRP, and much of the criticism included valid points. But, in my mind, the ARK Venture Fund better suits Wood’s strengths than an actively traded ETF (you can’t sell shares in this fund on a whim; it’s sellable only during published windows). The effective lockup and liquidity help Wood and investors focus on the long-term rather than constantly tweaking allocations (to her detriment) or worrying about day-to-day ETF fluctuations.
Brookfield Renewable Partners (BEP)
On the stabler and less speculative side of private equity investment strategies for retail traders, limited partnership Brookfield Renewable Partners (NYSE:BEP) is structured like a stock. The company owns and operates several private sustainable and renewable power companies. Like the ARK Venture Fund gave retail traders access to venture capital growth opportunities, Brookfield gives the same traders access to a range of sustainable solutions overseen by an expert private equity team.
Brookfield targets a 12% – 15% total return by snagging distressed assets (of which there are plenty these days), growing existing assets, and searching for deals on the open market. Those holdings and investments include energy distribution, utility-scale solar, wind, and hydroelectric power. The portfolio companies and Brookfield focus on long-term value creation over short-term quarterly financial engineering. That sentiment, combined with the nature of the investments, means that Brookfield Renewable Partners is a perfect buy-and-hold private equity investment strategy for retail traders.
Perimeter Solutions (PRM)
Surprised to see a standard stock on a list of private equity investment strategies for retail traders? Don’t be—Perimeter Solutions (NYSE:PRM) explicitly aims to “provide private equity-like returns with the liquidity of a public market.” At a 60% return over the past year, management is well on its way to doing exactly that (if not outperforming many private equity firms).
In many ways, Perimeter Solutions is the perfect private equity portfolio company; smaller, with a niche product that’s always in demand (firefighting equipment and chemicals), and with sufficient predictability that long-term value creation follows a fairly fixed game plan.
Perimeter recently claimed their total addressable market grew at a 7.2% CAGR since 2010, and they expect the same to hit $100.2 billion by 2027. Likewise, management is well on its way to another strong year as the first-quarter results included a 35% sales bump and a 3-million share buyback.
On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
