On Tuesday, the PEO AlphaQuest Thematic PE ETF (LQPE ) began trading on the NYSE Arca. This fund is run through joint teamwork between PEO Partners, Tidal Financial Group, and AlphaQuest. LQPE is an actively managed fund that looks to provide capital appreciation and preservation of capital. As a secondary goal, the fund also seeks to generate current income. The net expense ratio for LQPE sits at 1.25%.
“We are excited to partner with AlphaQuest and Tidal to bring to the market a truly innovative investment strategy that is benchmark-agnostic since the portfolio’s investment themes are anchored around private equity,” added PEO Co-Founder Randy Cohen. “We believe the strategy will deliver a distinctive investment performance with the potential for long-term capital appreciation, but manageable drawdowns during market upheavals.”
In order to accomplish the fund’s multifaceted objectives, LQPE employs a two-pronged strategy. The first prong of the fund is an equity portfolio run by PEO Partners. Meanwhile, the second prong focuses on a derivatives strategy managed by AlphaQuest. Due to the fund’s complex strategy, LQPE expects to hold between 250 to 350 securities and financial instruments within its portfolio.
For its equity portfolio, LQPE looks to target companies that have traits that are traditionally valued by public equity funds. Thus, the fund uses analysis and proprietary models to study public equity data to build a similar investment profile.
This investment profile includes seeking similar industry selections, along with a focus on quality and value. However, given the flexibility of the ETF platform, LQPE may offer more liquidity than a traditional private equity investment.
Advantages of Derivatives
AlphaQuest’s derivatives portfolio can help the fund meet its investment objectives in a few different ways. To start, derivatives can help bolster equity exposure to acquire similar leverage to that of a traditional private equity fund. This leveraged exposure can also help mitigate volatility against potential market downsides.
Cash strategies, money market funds, short-term U.S. Treasuries, and cash equivalents may also be employed by the fund. These are used in part as collateral on behalf of LQPE’s derivatives strategy.
“We look forward to complementing PEO’s equity strategy by dually deploying our trend-based hedging program that seeks to reduce downside volatility of performance compared to public markets, as well as trading instruments that increase equity exposure, which private equity funds typically achieve through traditional leverage,” noted Nigol Koulajian, AlphaQuest Founder and CIO.
LQPE’s multifaceted investment strategy can offer a menagerie of benefits. By employing distinctly different equity and derivative strategies, the fund can access returns from multiple investment avenues.
As an additional perk, the fund can be utilized as an accessible means to tap into a portfolio similar to a private equity strategy. Gaining thematic exposure to private equity investment techniques can help traders and advisors tap into new methods to grow one’s capital.
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