U.S. Markets open in 8 hrs 47 mins

Zacks Investment Ideas feature highlights: PowerShares Listed private Equity ETF, iShares MSCI EAFE Index Fund ETF and UBS E-TRACS Wells Fargo Business Development Company ETN

For Immediate Release

Chicago, IL –August 31, 2012 – Today, Zacks Investment Ideas feature highlights Features: PowerShares Listed private Equity ETF (PSP), iShares MSCI EAFE Index Fund ETF (EFA) and UBS E-TRACS Wells Fargo Business Development Company ETN (BDCS).


Invest Like Mitt Romney with These 3 ETFs


Love him or hate him, it is hard to argue that Mitt Romney has been an incredible investor over the years. With the one billion dollars that was raised in the heart of Romney’s reign (in five funds from 1984-1995), Bain Capital realized gains of roughly $4.17 billion, an impressive track record for the high-risk, high-reward private equity space.

In fact, according to a piece in the Wall Street Journal, Bain’s first five private equity funds have returned a whopping 88% per year from 1984-1999. This performance even crushed Buffett’s Berkshire Hathaway in the same time frame, as the Oracle’s stock ‘only’ added about 30% per year on average in the period (see The Five Best ETFs over the Past Five Years).  

While a contrast between the behemoth of Berkshire and the relatively nimble Bain funds may not be the best way to compare the two performers, it does show that at least during this relatively long time period, Romney was able to guide his firm to a performance that thoroughly crushed who many people consider to be the greatest investor of all-time.

So for investors who are able to put aside politics, taking a closer look at some of Mitt’s investment philosophies could be a great idea.

Unfortunately, many of these strategies aren’t exactly accessible by the average investor. Some require large investing minimums while most require capital lock-up periods or have high fees that are likely to put off many that are not in the multi-millionaire category (see Five Cheaper ETFs You Probably Overlooked).

Thanks to this, an ETF approach could be an interesting way to tap into some of Romney’s strategies but in a cheaper, and more average investor-friendly way. After all, ETFs do not possess minimum investment levels, are easy to trade throughout the day without lockup issues, and fees for ETFs often put mutual funds, and especially private equity pools, to shame.

With this in mind, we have highlighted below three funds to invest like Mitt Romney. While these three ETFs will probably not put up the returns that investors saw with Bain, they arguably allow investors to tap into similar strategies in a low cost, and well diversified way that is easily accessible to the average investor looking to invest like Mitt Romney:

PowerShares Listed private Equity ETF (PSP)

Many of Bain’s (and Romney’s) investments during the mid 80s and 90s centered around ‘private equity’. These investments generally consisted of buying large stakes in private companies or buying out public firms and taking them private. Much of Romney’s returns stemmed from solid picks via this route, suggesting it can be a source of incredible gains for many companies.

For ETF investors, PSP can be a way to play the sector via publicly traded companies in the space. These firms use capital to invest in private firms or take public ones private, but they also trade on major exchanges, allowing investors to gain exposure to their techniques quite easily (read Do You Need a Private Equity ETF?).

This is done by following the Red Rocks Global Listed private Equity Index which is a global benchmark of private equity firms that are publically traded. The index consists of between 40 and 75 firms and the fund is rebalanced and reconstituted on a quarterly basis.

In terms of national exposure, the U.S. takes the top spot at about 40% of assets. However, from a regional perspective, Europe makes up half the portfolio, including top five weightings to the UK, Sweden, France, and Switzerland.

Unfortunately, the fund is somewhat expensive at least when compared to other ETFs. Net expenses come in at 2.55% thanks to 1.85% in acquired fund fees, however, this isn’t much compared to Bain, as the company’s new products look to have fees around 1% but also 30% of investment profits (other options include 1.5% fees and 20% in investment profits), a level that could greatly cut into total returns.

iShares MSCI EAFE Index Fund ETF (EFA)

According to a PDF from Opensecrets.org, Mitt’s blind trust has, in iShares’ EFA, at least one million dollars, but not more than five million dollars. While this is by no means a large position in Mitt’s portfolio, it is one of the few ETFs that are disclosed in the investment document, suggesting that it is one of the only ‘pure plays’ that you can make via exchange-traded funds on Romney’s investments.

The holding is also a nice compliment to what is probably a very U.S.-centric portfolio, giving Mitt’s trust broad exposure to a number of nations outside of America. However, it should also be noted that the trust has a sizable allocation to SPY as well, suggesting that Mitt has at least a small handful of ETFs in the Trust’s portfolio.

For investors seeking to make a play on EFA too, it should be noted that the product tracks the MSCI EAFE Index. This gives broad exposure to developed markets around the world outside of the U.S. and Canada, but specifically in Europe, Australiasia, and the Far East (see the Guide to the 25 Most Liquid ETFs).

This produces an impressive fund which has just over 900 stocks in its portfolio and one that does not put more than 2% in any one stock. This spread out nature is also reflected in the fund’s sector makeup, as the product has six sectors that make up at least 9% of assets.

From a country perspective, Japan takes the top spot at 20% of assets, just edging out the UK. However, much like in PSP, this fund tilts towards Europe overall, as close to two-thirds of the basket goes to the European continent.

Fees are much lower in this product—allowing investors like Romney’s trust to keep more on a yearly basis—coming in at just 34 basis points a year. Meanwhile, volume is quite robust as is total AUM for the fund, suggesting very tight bid ask spreads and low total costs for the fund as well.

UBS E-TRACS Wells Fargo Business Development Company ETN (BDCS)

For another play on the private equity side of the Romney investing style, investors have BDCS. This product targets Business Development Companies, which much like private equity, invest in illiquid or non-public firms.

However, BDCs are usually taxed as RICs which means that they generally qualify for a pass-through tax structure, so long as they pay out at least 90% of their taxable income as dividends. Thanks to this difference, BDCs are often among the highest yielders in the investment world. Furthermore, they are usually more ‘open’ products than their private equity or venture capital cousins, meaning that everyday investors can easily buy these firms on the open market.

 About Zacks


Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Len Zacks. The company continually processes stock reports issued by 3,000 analysts from 150 brokerage firms.  It monitors more than 200,000 earnings estimates, looking for changes.


Then when changes are discovered, they’re applied to help assign more than 4,400 stocks into five Zacks Rank categories:  #1 Strong Buy, #2 Buy, #3 Hold, #4 Sell, and #5 Strong Sell. This proprietary stock picking system; the Zacks Rank, continues to outperform the market by nearly a 3 to 1 margin.  The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter Profit from the Pros.  In short, it’s your steady flow of profitable ideas GUARANTEED to be worth your time.  Get your free subscription to Profit from the Pros at:  http://at.zacks.com/?id=7298


Follow us on Twitter:  https://twitter.com/ZacksResearch


Join us on Facebook:  https://www.facebook.com/ZacksInvestmentResearch


Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.


Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.


Media Contact
Zacks Investment Research

800-767-3771 ext. 9339





Read the analyst report on PSP

Read the analyst report on EFA

Read the analyst report on BDCS

Zacks Investment Research

More From Zacks.com