BUYO ETF Debuts on NYSE: A New Era for Accessing Private Equity-Like Returns

October 08, 2024 12:03 PM PDT | By Team Kalkine Media

BUYO ETF Debuts on NYSE: A New Era for Accessing Private Equity-Like Returns — Image source: Shutterstock

Headlines

BUYO ETF uses a systematic approach to select small to mid-cap stocks similar to those favored by private equity (PE) firms.
The ETF targets companies with attributes like strong cash flow, higher margins, and cash discipline, commonly sought by PE investors.
BUYO provides exposure to public equities while leveraging private equity strategies for long-term growth.

KraneShares' new ETF, the Man Buyout Beta Index ETF (BUYO), has launched on the NYSE. BUYO tracks the Man Buyout Beta Index, which mirrors the strategies of private equity (PE) funds but focuses on public equities. By employing a systematic approach, BUYO selects small to mid-cap companies from the Russell 2500 Index, emphasizing industries and company characteristics commonly targeted by PE firms.

The fund identifies companies with specific attributes such as strong free cash flow, higher operating margins, disciplined cash management, and consistent revenue growth. These traits are known to appeal to PE funds, making BUYO an attractive option for those interested in PE-like investments but with the liquidity and transparency of an ETF.

BUYO has a correlation to the Preqin Private Equity ex-Venture Capital Index and aims to deliver long-term returns similar to traditional buyout funds. According to Kevin Orr, Managing Director at KraneShares, BUYO offers exposure to companies that PE firms typically target for buyouts, but with the advantage of being fully invested in public equities.

John Lidington, Co-Portfolio Manager at Man Numeric, highlights that BUYO’s underlying approach seeks to replicate the methodologies used by buyout funds to identify potential takeover candidates. This gives investors access to the value creation strategies employed by private equity firms while investing in publicly traded companies.

Traditionally, private equity investments come with high entry barriers, such as long lockup periods and significant minimum investments. However, BUYO presents a more accessible option, providing liquid exposure to PE-like strategies. Jonathan Shelon, Chief Operating Officer of KraneShares, emphasizes that BUYO could be appealing to institutional investors seeking PE exposure while waiting for traditional fund placements, as well as those aiming to diversify their portfolios with alternative strategies. BUYO offers an innovative pathway for investors to integrate PE-like returns into a liquid, publicly traded vehicle.

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