The democratic winds in the private equity market ride the ETF

The democratic winds in the private equity market ride the ETF

This year's last forum shared with major insurers about the direction and prospects of capital regulation (K-ICS) and foreign alternative investment amid macro uncertainty in the Trump 2.0 era.

In particular, this topic is Liquid vs. Lliquid Alternative Investments, which believes that liquidity is an important consideration not only in the investment review stage but also in all areas of follow-up management.

Usually, alternative assets take advantage of the illiquid premium to seek excess returns.

Unlike traditional assets, alternative management areas do not care so much about macro and political events when investing. This is because the top down outlook is not profitable because alternative investments are mainly private (outdoor) and closed, based on a long-term time series of 5-7 years.

However, recent failures in domestic real estate PF/loan and U.S. commercial real estate investment prove that macro variables such as prices and interest rates have greatly affected insolvency such as worsening cash flow.

Therefore, the liquidity premium of an alternative asset is controversial in stressful situations. In alternative portfolio management, liquidity management enables flexible response to short-term market changes (risk management, new investment opportunities, etc.) to increase operational sustainability.

On the previous day, Virtus Asset Management listed its first private credit active ETF (Ticker: PCLO) on the exchange. Today, BlackRock has already requested the SEC to review the listing of its assets managed futures active ETF (Hedge Fund CTA Strategy). Major players representing public and private companies are making every effort to incorporate private equity assets, which have been exclusive to investors in specialized institutions, through ETFs.

The democratization of the private equity market is an irreversible trend of times. If the accessibility of the private equity market is significantly improved through ETFs with transparency, liquidity, and low pay peaks, positive changes are expected that reduce the rigidity of HNWM as well as the institution's alternative portfolio management and strengthen efficiency and flexibility.