Until relatively recently, the private-equity mutual fund category had been populated by merely one fund called the ALPS/Red Rocks Listed Private Equity Fund (LPEFX), launched in 2007 and requiring a minimum investment of $2,500.
“The Red Rocks private-equity strategy may be a good fit for investors with longer-term investment horizons. Although the fund is liquid and priced daily, there is potentially more volatility compared to other asset classes because the underlying private investments made by the private-equity manager are illiquid,” said Mark Sunderhuse, Red Rocks Capital portfolio manager.
The ALPS/Red Rocks Listed Private Equity Fund currently has $237 million in assets and as of April 23, had returned 30 percent in the last year, 10.2 percent annualized in the last three years and -3.3 percent annualized in the last five years, according to Morningstar.
The fund only invests in publicly traded private-equity firms that are listed on various global exchanges, so the fund has daily liquidity with daily pricing,” Sunderhuse told FA magazine.
In exchange for illiquidity for seven to 10 years, traditional private equity funds claim to offer a higher rate of return than the listed stock market but there are risks and fees. The ALPS/Red Rock fund charges a 5.5 percent load and 1.5 percent expense ratio. Carlyle private equity fund costs will include management fees of 1.00 percent to 1.75 percent, an incentive fee of 20 percent, a second-layer management fee of 1.20 percent with a cap of 0.75 percent for the first year, a sales load of up to 3.50 percent and a redemption fee of 2.00 percent for the first year, according to Morningstar.
“The retail market for private equity has significant capacity and room for growth. We welcome quality competition,” said Sunderhuse.