Private Equity in an ETF? ERShares Founder Joel Shulman Explains
On this week’s episode of “ETF Prime,” host Nate Geraci was joined by Todd Rosenbluth, Head of Research at VettaFi. Together, Rosenbluth and Geraci discuss Nvidia’s performance and how it affects ETF Strategies. Afterward, Joel Shuman, Founder of ERShares, joined the podcast to discuss the Entrepreneur Private-Public Crossover ETF (XOVR).
Nvidia as a Bellwether
To begin this week’s podcast, Geraci highlighted how Nvidia could be seen as the “bellwether” for both bulls and bears. While bullish investors may want to keep riding the AI boom, Geraci observed that bearish investors seem to see the company as the poster child for overvalued mega-cap tech stocks.
Rosenbluth agreed with Geraci’s assessment and noted how impressive Nvidia’s run has been thus far. Even so, Rosenbluth highlighted how investing in a diversified large-cap ETF can provide good exposure to Nvidia while mitigating bearish concerns of overvaluation.
Earnings Analysis
Geraci then noted how Nvidia recently had its second-quarter earnings. He asked Rosenbluth if any factors in the earnings call stood out to him. Additionally, Geraci expressed interest in hearing Rosenbluth’s thoughts on Nvidia’s current valuation.
Rosenbluth noted that Nvidia’s earnings “soared even faster than revenues.” It beat analyst expectations, which is always a great sign for a company. However, Rosenbluth noted that even as Nvidia’s fundamentals remain strong, the company has to continue reaching for an ever-rising bar. “It has to hit even above earnings expectations for the stock to climb higher,” added Rosenbluth.
ETF Advantages
Keeping the size and scale of Nvidia’s performance, Geraci asked Rosenbluth about ETF strategies that can help investors benefit from Nvidia exposure. To start, Rosenbluth highlighted active ETF strategies, which can boost or reduce Nvidia’s portfolio weight to benefit from the stock’s growth while mitigating potential risk.
As a thematic play, Rosenbluth also spotlighted the ROBO Global Artificial Intelligence ETF (THNQ). Noting that the ETF uses a VettaFi index, Rosenbluth pointed out how the fund holds some Nvidia exposure but also holds overlooked AI-tied companies such as Amborella or CyberArk. This would provide diversification and AI momentum to a portfolio.
“If you believe in artificial intelligence as a long-term theme, and Nvidia certainly suggests that you should, you might want to take a more holistic approach. Instead of just owning the semiconductor companies, invest in other companies benefitting from this trend,” Rosenbluth noted.
Weight Expectations
While Nvidia has enjoyed a strong performance thus far, Geraci noted that many of the most highly-used large-cap ETFs hold a heavier weight in the company despite the funds covering broad indices. Going further, Geraci asked Rosenbluth if he thinks the favorable Nvidia weight could be a concern for investors.
Rosenbluth noted that investors should look within the holdings of funds to ensure they’re fully comfortable with the portfolio exposure. However, he highlighted how transparency is one of the crucial benefits that the ETF wrapper can offer.
More Diverse Exposure
Keeping on the topic of concentration risk, Geraci asked Rosenbluth if there were any ETFs he’d highlight that could help reduce Mag 7 exposure. Among other examples, Rosenbluth noted that the Astoria US Equal Weight Quality Kings ETF (ROE) takes a quality approach to portfolio construction but mitigates concentration risk by equally weighing its stocks.
Rosenbluth also flagged the Alps Equal Sector Weight ETF (EQL) as an option for investors concerned about overweighting tech exposure. EQL’s strategy is to provide equally weighted exposure to all 11 sector SPDR ETFs, providing even exposure across a variety of sectors.
The ETF Express Awards
Lastly, Rosenbluth highlighted how VettaFi has been named a finalist in four categories for the ETF Express Awards. To learn more about the ETF Express Awards, visit etfexpress.com.
Private Equity Exposure
To close out this week’s episode, Geraci was joined by Joel Shuman, Founder of ERShares. Geraci asked Shuman to talk about the Entrepreneur Private-Public Crossover ETF (XOVR), which he noted was the first ETF that holds up to 15% in private equity.
Shuman began by noting that private equity tends to be very illiquid and requires a significant amount of money to buy in. XOVR balances the liquidity by keeping the remaining assets in “very liquid securities, so investors can come in and out.”
Looking at private equity costs, Shuman noted that “in this particular product, we’re buying pieces of secondary trades, secondary privates.” By doing so, XOVR can provide a more liquid and cost-accessible means of gaining private equity exposure.