The number of publicly traded companies has been shrinking for years, even as more capital flows into private equity (PE) and venture capital C). The shift has left financial advisors searching for practical ways to access private market–style returns without the usual hurdles—illiquidity, high fees, accreditation requirements, and tricky manager selection. Pacer ETFs’ PE/VC ETF (ticker: PEVC) aims to solve that challenge in a way that fits directly into a modern, ETF-based portfolio.
Sean O’Hara, President at Pacer ETF Distributors, has watched the investable universe narrow as more companies stay private for longer. “There’s a lot of money looking for places to be that are not in the public markets,” he says. “And private equity and venture capital tend to be the place where people place that money.” But traditional private funds come with significant drawbacks—lockup periods, capital calls, limited liquidity, and fee structures that can consume hundreds of basis points of returns.
PEVC takes a different path. It uses systematic replication—applied through liquid, publicly traded stocks—to mirror the return characteristics of the entire U.S. private equity and venture capital market. Instead of owning private companies directly, the ETF translates private market behavior into a cost-efficient, transparent vehicle advisors can easily use.
The Replication Engine: Math, Not Magic
Understanding how PEVC works means letting go of the assumption that a private market ETF must own private assets. The fund doesn’t touch private companies. It doesn’t blend public and private exposures. Instead, working with DSC Quantitative Group, Pacer relies on a replication methodology grounded in more than a decade of research.
The work begins with FTSE Russell’s extensive private market data. For two decades, the firm has tracked every private equity and venture capital company—some 20,000 names representing roughly $7.5 trillion in value. As funding rounds occur, FTSE Russell marks these companies to current valuations and compiles benchmark indices that reflect the state of private markets with unusual precision.
DSC Quantitative then builds a liquid portfolio of about 200 publicly traded stocks designed to replicate the sector composition, market cap distribution, and beta characteristics of the private market universe. “If you think about the universe, you can break the private equity and venture capital universe down just like you could the S&P 500 market cap sector,” O’Hara explains.
Through proprietary quantitative models, DSC determines the necessary sector-level adjustments to match the estimated beta of corresponding private market sectors. Because private companies often trade at different multiples than public comparables, the fund uses swap agreements to fine-tune exposure, with cash holdings serving as collateral.
O’Hara emphasizes that individual stock selection isn’t the point. “It almost doesn’t matter which publicly traded stocks we use. It’s the sector and the market cap exposure that we’re after,” he notes. Whether the fund uses Nvidia, Google, Apple, or Meta to gain technology exposure matters less than achieving the correct sector weight and beta profile to match private tech companies.
The methodology has proven effective in practice. DSC’s private fund using the same replication approach has tracked the FTSE Russell private equity and venture capital benchmarks at approximately 99% accuracy for more than a decade. “It’s the same principle here,” says O’Hara. “We’re essentially trying to optimize our equity portfolio to replicate the return pattern of those private equity and venture capital names.”
The Cost Equation: Keeping More of What Markets Deliver
Fee structures represent one of the most significant drags on private market returns. Traditional PE and VC funds typically charge management fees of 1–2% annually plus performance fees of 10–20% above hurdle rates—the notorious “2 and 20” model, or variations thereof.
“If you think about private equity over the last 25 years or venture capital over the last 25 years, the returns are attractive at the company level,” O’Hara says. “But once you reduce that return by the cost, you can give up 300 or 400 basis points of that return in fees.”
PEVC’s 85-basis-point expense ratio reshapes that equation. O’Hara offers a straightforward comparison: if the underlying private market index returns 20%, an investor in a traditional private fund might net 17% after fees. “Here, if the private equity venture capital index did 20%, the fee on the ETF is 85 basis points. So, you’re going to be getting 19.15%, so you keep a bigger percentage of the return because it’s just a simple unitary fee on an ETF that’s designed to track that index’s returns.”
The fee differential can compound significantly over time. Every 300 basis points surrendered to fees represents substantial wealth erosion across multiyear holding periods. By providing similar exposure at a fraction of the cost, PEVC aims to help clients capture a larger share of private market returns.
Solving the Liquidity Problem
Illiquidity remains one of the most persistent obstacles in private markets. Capital calls arrive unpredictably. Distributions may take years. Redemption gates can lock investors out when they need liquidity most.
“We’ve seen this a little bit in the private credit world recently—they can shut the gate on you,” notes O’Hara. The fund structure provides daily liquidity instead, trading on an exchange like any other ETF.
The liquidity advantage extends beyond emergency redemption scenarios. Institutions with substantial private market allocations can use PEVC as a liquidity sleeve within their alternatives portfolios.
“They are big buyers of private assets,” he explains. “Well, here they can continue to do that but create a liquidity sleeve in that part of their portfolio where we can be there and you can get exposure to private equity and venture capital returns. But if you need cash, if you’re in a private fund, good luck. Here, you just say, Okay, well, I’ll just liquidate a part of my ETF exposure here. So, that has tremendous applications.”
The ETF structure also introduces tax efficiency that direct private funds cannot replicate. When private companies go public, traditional fund investors often incur taxable events. PEVC avoids those forced capital gains. “If they exit via an IPO, we’ll just adjust the portfolio to take that exposure out. Therefore, the underlying shareholder, because we can rebalance just like any other ETF, won’t have to pay that capital gains tax,” says O’Hara.
He summarizes the collective benefits from an advisor’s perspective. “There’s a lot of advantages over time to private equity and venture capital. There are attractive returns for sure, but we think we’ve built a wrapper here that allows the individual investor or the financial advisor to put that exposure in their traditional ETF model as opposed to having money set over on the side that has all of what we think are some of the drawbacks,” he observes. The combination of lower fees, full liquidity, tax efficiency, and eliminated accreditation requirements creates a substantially different experience than traditional private fund investing.
Democratizing Access Beyond Accredited Investors
Accreditation requirements keep many investors—often successful, but not ultrawealthy—locked out of private markets. ETFs can remove those barriers.
“You don’t need to be an accredited investor,” O’Hara says. “Sometimes, there’s folks that are middle market, $1 million to $3 million or $5 million net worth, that aren’t necessarily going to meet the requirement to become an accredited investor. So, they’re sort of walled out from the good stuff.”
Beyond legal access, the fund simplifies administrative burdens. Advisors don’t need to collect and verify accreditation documentation, prepare subscription agreements, or manage the operational complexity of private fund investments. PEVC slots directly into ETF-based portfolio models without special treatment.
Mitigating Manager and Vintage Year Risk
Selecting private market managers is notoriously difficult. Dispersion is wide, performance persistence is inconsistent, and identifying top-tier managers in advance is nearly impossible. O’Hara compares the challenge to picking active managers in public markets—only with higher stakes.
“You can buy exposure to the broad index and not have to worry about did you get the right name,” he says. “Did you buy into X, Y, Z, and they didn’t make it, or did you buy into A, B, C, and they wound up making a big return? Here, just think of it like broad market exposure for private equity and venture capital, or you can capture that broad index’s return without having to worry about am I in the right name or am I with the right manager.”
The fund tracks FTSE Russell’s comprehensive private market indices, which capture nearly 5,400 PE-backed companies valued at approximately $5 trillion and more than 13,000 VC-backed companies valued at about $2.5 trillion. “You get the return of that broad index, so you’re not making a single bet on a single name or a single bet on some private equity firm someplace. So, you take out manager risk or individual selection risk,” O’Hara explains.
The fund also addresses vintage year risk. Instead of being tied to the market environment of a single fundraising year—as in traditional PE and VC funds—PEVC rebalances monthly, staying aligned with current conditions rather than locked into a particular cycle.
Practical Portfolio Implementation
PEVC can function as a completion tool for portfolio construction. Advisors already run ETF-based models for client portfolios. Adding private market exposure traditionally meant creating a separate sleeve outside the main model—different reporting, different rebalancing, different operational procedures.
“What we’re trying to do is to bring private equity and venture capital returns to the individual investor and a wrapper that gives them no individual company and no private or fund individual selection risk in a way that they can get a higher percentage of the total return be fully liquid,” says O’Hara. The fund can fit seamlessly into existing ETF models rather than requiring parallel structures.
From an asset allocation perspective, O’Hara positions PEVC within alternatives. “If you think about portfolio construction, you’ve got stocks and bonds and cash and alts. I probably would tuck this into my alt exposure,” he suggests. Yet the liquid, transparent nature of the ETF enables it to function differently than traditional alternatives.
Still, he doesn’t see the fund as a replacement for direct private market investments for all clients. “I’m not saying that you don’t need to have any private equity or venture capital direct exposure,” O’Hara clarifies. Rather, PEVC can serve as core alternatives exposure while direct private investments function as satellites for clients with sufficient scale and risk tolerance.
The Shifting Private Market Landscape
Private markets now represent a larger share of total corporate value. Companies stay private longer. Venture-backed firms can scale to billions without ever listing. Buyout firms routinely take public companies private. Public equity indices now reflect a shrinking portion of U.S. business activity.
“There’s fewer publicly traded stocks out there today than there has been almost in history, I think,” O’Hara observes. The shift can create challenges for advisors seeking to build portfolios that capture the full scope of economic growth.
PEVC seeks to address the gap by providing systematic exposure to the private portion of the equity market. “The publicly traded securities and PEVC are nothing more than a proxy, if you will, that replicates the returns of that private equity and venture capital index. And the tracking has been phenomenal,” he adds.
Advisors can now construct portfolios that span the full equity market—public and private—using liquid, transparent, cost-efficient tools. Rather than explaining to clients why their portfolios exclude major private companies and fast-growing venture-backed firms, advisors can offer comprehensive equity market participation through a combination of traditional public equity ETFs and PEVC.
The fund represents a new category of solution for accessing alternative return streams. “I think the idea is a terrific idea,” O’Hara says. “I think I was one of the first people to put real money into it personally, because I think it just makes sense.”
For advisors navigating client demand for private market exposure, PEVC might offer a path forward that aims to eliminate traditional barriers while maintaining the operational simplicity clients expect from modern portfolio management.
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Additional Resources
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Disclosures
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. You cannot invest directly in an index.
There is no guarantee that this investment strategy will succeed; the strategy is not an indicator of future performance, and investment results may vary. The investment strategy presented is not appropriate for every investor and individual clients should review with their financial advisors the terms and conditions and risk involved with specific products or services.
