Mar 24, 2022 - Economy & Business

VCs move into public equities

A wave of money consuming a medical sign

Illustration: Aïda Amer/Axios

For years, public market investors like hedge funds and mutual funds have flooded into the private markets. Now we may see money flow in the other direction.

Driving the news: Lux Capital, a 22-year-old venture capital firm, has launched a digital health ETF.

  • This comes a few years after Lux launched a series of indexes, based on various tech themes. Initial investments will come from Lux partners, rather than from Lux funds.
  • The ETF is being done in partnership with First Trust Advisors, and was enabled by a new, Lux-incubated startup called Thematic.

What they're saying: "Venture capitalists make speculative bets on specific companies, but we also develop points of view on how we expect various industries to develop and play out over longer periods," explains Lux co-founder and managing partner Peter Hebert. "That could become an edge in public market investing, just like Tiger and Coatue believe their perspectives give them an edge in private market investing."

  • Hebert adds that several VC firms reached out after Lux launched its public equity indexes, and believes they too may create ETFs.

The bottom line: Lux isn't the first VC firm to dabble in direct public equities (e.g., Sequoia Capital Global Equities). But the branded ETF is a new development, and signals a deepening of the convergence between public and private markets.

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