A new series of indexes aims to measure the performance of the billion-dollar venture-capital backed companies that Wall Street calls “unicorns.”
Shares of “unicorns” – companies such as Instacart, Stripe and ByteDance – and other VC-backed companies valued at $1 billion or more have become available to some investors through pension plans and “crossover” mutual funds, which invest in both public and privately owned companies.
The indexes are being published by ratings leader and index provider Morningstar and include leading VC data, analytics and insights from PitchBook, an independent subsidiary of Morningstar.
To determine whether you should invest like a VC by putting your money into indexes exposed to unicorns, consider matching with a financial advisor.
“In today’s market, investors are increasingly looking to nontraditional asset classes like private markets for portfolio diversification and investment opportunity,” said Ron Bundy, president, Morningstar Indexes. “Our new global unicorn indexes combine the deep data and insight of PitchBook with the best practices of Morningstar Indexes to deliver a new series of benchmarks for the late-stage venture capital market.”
One example of the new indexes is the Morningstar PitchBook US Unicorn 100 Index, which includes SpaceX, Stripe, Juul, Waymo, Chime and Instacart among its top 10 holdings. The index tracks its holdings back to June 2014. As of Nov. 9, the index stood at 8,407, with a one-year range of 8,244 to 9,087, reflecting holdings with a constituent market capitalization of $8.7 billion.
The index’s five-year performance puts it up by 286% and down 0.05% for one year. As of Nov. 9, the index is down 4.34% year-to-date, versus a loss of 21.35% for the Standard & Poor’s 500 index.
The 11 new indexes will track global, regional and single-country companies. They include:
- Morningstar PitchBook Global Unicorn Index
- Morningstar PitchBook Global Unicorn 500 Index
- Morningstar PitchBook US Unicorn Index
- Morningstar PitchBook US Unicorn 100 Index
- Morningstar PitchBook Europe Unicorn Index
- Morningstar PitchBook Europe Unicorn 50 Index
- Morningstar PitchBook UK Unicorn 20 Index
- Morningstar PitchBook Asia Unicorn Index
- Morningstar PitchBook Asia Unicorn 100 Index
- Morningstar PitchBook China Unicorn 50 Index
- Morningstar PitchBook India Unicorn 25 Index
Morningstar’s announcement noted that quantifying the performance of the various unicorn stocks “has been difficult for index providers to track due to its illiquidity, lack of reporting standards and no mark-to-market pricing capability.”
Individual investors can find shares of unicorn shares in the holdings of several mutual funds from Fidelity, T. Rowe Price and other big investment firms, but no widely accessible mutual funds invest exclusively in shares of unicorn companies, which have expanded from 39 in 2013 to more than 1,200 in 2022. One exchange-traded fund (ETF) focusing on unicorns is the Emerging Markets Internet & Ecommerce ETF from EMQQ Global, which targets emerging market consumer sector companies related to online retailers or the e-commerce industry and trades on the Hong Kong exchange.
That’s not to say that one or more ETFs based on the new Morningstar indexes won’t come to the individual investor market sometime soon. Fund managers launched more than 232 new ETFs in the last six months, including funds that track shares of single stocks and one that tracks companies operating around “sustainable gold.”
Bottom Line
Retail investors can invest like VCs by putting their money into unicorns. They can do so through indexes published by ratings leader and index provider Morningstar and include leading VC data, analytics and insights from PitchBook, an independent subsidiary of Morningstar.
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