A recent spate of hot initial public offerings (IPOs), including Bullish (BLSH), Circle (CRCL) and Figma (FIG), among others, is a positive in terms of igniting animal spirits and giving market participants credible reasons to pay attention to stocks outside the magnificent seven.
The recent flurry of IPO activity also act as a reminder that it’s still difficult for ordinary investors outside the high-net-worth category to invest in private companies before those firms go public. Sure, there’s been some democratization of access to private companies, mainly by way of various iterations of private market funds.
Problem is those products often carry high fees and there are no guarantees their holdings will be among the next hot IPOs – something confirmed by the fact that many private market funds lag basic gauges of domestic stocks over extended holding periods.
Leave it to ETFs to somewhat solve this problem. The universe of ETFs providing exposure to closely held corporations isn’t yet expansive, but it’s growing and these funds are employing unique approaches to providing at least some exposure to non-public firms. Let’s examine one here.
Private AI Access in this ETF
It’s not surprising that investors want access to privately held artificial intelligence (AI) companies. After all, they’re seeing how well many of the publicly traded equivalents and they want access to what could be “the next Nvidia. ” No guarantees on the hunt for an Nvidia sequel, but the KraneShares Artificial Intelligence & Technology ETF (Ticker: AGIX) is on the right track in terms of mixing public and private exposure.
AGIX “has taken a notable step forward by adding direct exposure to xAI, Elon Musk’s AI venture, alongside its existing position in Anthropic. AGIX now directly holds both companies, appearing on their respective cap tables,” according to KraneShares.
Anthropic and xAI are both top 10 holdings in AGIX, combining for 5. 25% of the ETF’s roster. Not a massive percentage, but one that stands out in the ETF space and one that’s testament to AGIX’s flexibility.
“AGIX invests at least 80% of its net assets in securities included in the Solactive Etna Artificial General Intelligence Index, designed to capture the performance of companies engaged in developing and applying artificial intelligence technologies,” adds KraneShares. “AGIX primarily holds publicly listed global AI and technology companies and can allocate to private companies that are not included in its underlying index. ”
AGIX Delivering the Goods
At the end of the day, AGIX isn’t a private market ETF in the strictest sense of that term, but it checks the box of providing a modest amount of private company exposure in a highly sought after niche.
That objective is accomplished with a roster of publicly traded companies that clients and investors know and love. For example, six of the ETF’s top seven holdings are six of the seven magnificent seven stocks. Importantly, AGIX has delivered for investors.
“Since its inception on July 18, 2024, AGIX has delivered an impressive 29. 55% total return, outpacing the Nasdaq 100’s 18. 63% over the same period (as of July 31),” said KraneShares.