This ETF has achieved exponential growth in the last 5 years, recording a performance of +100%.
In the world of investing, success is often measured by the ability to exceed expectations and achieve extraordinary results. Over the past five years, one exchange-traded fund (ETF) has shined exceptionally, demonstrating its strength in the private equity industry. In this article, we will explore this product in-depth, an ETF that has achieved a remarkable +100% return over five years.
With a solid structure, a well-thought-out strategy, and a diversification-based approach, this ETF has attracted the attention of investors. Join us as we explore the keys to this remarkable achievement and how it could impact your approach to investing.
What is private equity?
Private equity represents a sophisticated medium-long-term investment strategy, oriented towards companies not listed on the stock exchange, but with considerable growth potential. This approach is mainly adopted by institutional investors, such as private equity firms or specialized funds, as well as by individuals with considerable wealth. The primary objective consists of obtaining significant profits, both through the future sale of the acquired shareholdings and through the possible listing of the investee company on the stock exchange.
However, private equity is not just a question of financing. Investors in this sphere are characterized by active involvement in the company itself. They collaborate closely with the existing management team to identify opportunities to improve operational efficiency, drive business growth, and create value over the long term.
A distinctive aspect of private equity is its medium/long-term approach. Investors in this asset class typically hold their holdings for a period that can range from a few years to over a decade. During this time, they work side-by-side with company management, bringing specialized skills and resources to help the company achieve agreed-upon goals.
Xtrackers LPX MM Private Equity Swap
The Xtrackers LPX MM Private Equity Swap UCITS ETF 1C is an exchange-traded fund (ETF) that seeks to replicate the performance of the LPX Major Market index. This index tracks the 25 most liquid-listed private companies worldwide that are covered by the LPX. The ETF is legally structured as a variable capital investment trust (UCITS) with assets of EUR 316 million. It is listed on several stock exchanges, including the Italian Stock Exchange, the London Stock Exchange, the SIX Swiss Exchange, and the Stuttgart Stock Exchange. It was launched on 17 January 2008 and has a tax domicile in Luxembourg.
Replication and Structure
This ETF uses a synthetic replication strategy through an Unfunded swap to track the performance of the LPX Major Market Index. In simple terms, the ETF does not hold the shares of companies listed in the index, but instead uses financial instruments, such as swap contracts, to gain exposure to the same securities. This approach involves a certain degree of counterparty risk, although it is usually mitigated through arrangements with reputable financial institutions.
Distribution and Currency Policy
The ETF operates on an accumulation policy, meaning that dividends generated by companies listed in the index are reinvested in the ETF rather than distributed to investors. This can be advantageous for long-term investors looking to maximize capital growth. The ETF is denominated in EUR.
Historical Performance
In recent years, the product has demonstrated solid performance. For example, in the last year, it returned +27.91%, while in the previous five years it returned a remarkable +109.04%. However, it should be noted that it suffered a loss of -30.03% in 2022. This highlights the importance of portfolio diversification and understanding the risks associated with investing in private equity-related financial instruments.
Risk and Volatility
The ETF has an annual volatility of 19.76%, therefore some variability in returns. However, this volatility is in line with private equity investments, which tend to be more volatile across different themes. Furthermore, the return per risk is relatively stable at 1.19, 0.56, and 1.09 for periods of 1, 3 and 5 years, respectively.
Maximum Drawdown
The maximum drawdown represents the maximum loss recorded by an investment from its all-time high. In this case, the ETF has seen a maximum drawdown of -14.06% over the past year, -36.76% over the past three years, -47.93% over the past five years and -76.62 % since its launch. This data highlights the cyclical and volatile nature of private equity investing.
Conclusion
The Xtrackers LPX MM Private Equity Swap UCITS ETF 1C allows investors to participate in the most liquid listed private company market worldwide through a synthetic replication approach. However, investors should be aware of the risks associated with this strategy, including counterparty risk and volatility. It is important for investors to carefully consider their risk tolerance and investment strategy before deciding whether this ETF is right for their portfolio.
| Disclaimer The information and considerations contained in this article should not be used as the sole and principal basis on which to make investment decisions. The reader retains full freedom in his own investment choices and full responsibility in making them, since he alone knows his risk appetite and his time horizon. The information contained in the article is provided for informational purposes only and its disclosure does not constitute and should not be considered an offer or solicitation for public savings. |
Original article published on Money.it Italy 2023-12-11 18:17:52. Original title: +100% in 5 anni per questo ETF
