Private-Public Crossover ETF Sees Inflows Explode After Addition Of Musk’s SpaceX

In a note titled “ETFs Push to Bridge Gap to Private Assets,” Bloomberg Senior ETF Analyst Eric Balchunas discussed the ERShares Private-Public Crossover ETF (XOVR), which provides exposure to both public and private equity securities for institutional, retail, and high-net-worth clients.

Balchunas highlighted that XOVR’s recent addition of SpaceX as its top holding underscores the ETF industry’s efforts to tap into the $14 trillion private-asset market, which has been mostly inaccessible to retail investors. He further noted that since the inclusion of SpaceX, XOVR has attracted $116 million in inflows, quadrupling its assets. 

CNBC confirmed last month that SpaceX hit a $350 billion valuation based on a secondary share sale. The round did not include raising new capital. SpaceX’s soaring valuation comes as the company dominates the global space race with a near-monopoly on the global satellite launch market. Yet SpaceX is a private company. 

Until now: XOVR 

Here’s more about XOVR via Balchunas’ note:

Private-Public Crossover ETF Adds Big Stake in SpaceX

A private company is the largest holding in an ETF for the first-time ever as XOVR has a 9% weighting to Elon Musk’s SpaceX via a special purpose vehicle. XOVR isn’t a new ETF per se, but it recently changed strategy to focus on entrepreneurial companies, including those that are closely held. SEC rules limit such holdings to no more than 15% of the fund. This isn’t totally uncommon in mutual funds, but it’s new terrain for ETFs, which have shown a real and determined interest in penetrating the market for private equity and credit.

ETFs are the preferred vehicle of America’s financial advisers, which have around $40 trillion in assets but limited access to private assets. The race is on to bridge that gap, similar to how funds’ crypto holdings caught up via the hugely successful Bitcoin and Ether ETFs

Flows Show the ETF Is on to Something

Since converting to its public-private strategy and adding SpaceX, XOVR has taken in $116 million, quadrupling its assets. This evidence of investor interest will likely only embolden other ETFs to try the same. XOVR’s performance has helped, as the ETF is up 23% since switching to a public-private crossover strategy, which is about double QQQ and triple SPY. It’s also besting ARK Venture, an interval fund that also has a big holding in SpaceX. Though an interval fund may arguably be the better format to deliver private-company exposure to retail, it’s not the preferred format for these investors. They have shown they want it in ETFs — even if that means bigger premiums and discounts. The fact that XOVR already has doubled ARKVX shows this. 

Balchunas has found a way for investors to own SpaceX through a private-public crossover ETF.