Wall Street is tapping into rising investor demand for private equity exposure with a surge of exchange-traded funds (ETFs) designed to replicate the asset class.

While regulators have yet to approve ETFs that directly hold private assets, firms are launching alternatives that track private equity-like returns by investing in comparable public companies or mimicking buyout strategies.

Investor interest in private-asset ETFs accelerated after Apollo Global Management and State Street Global Advisors filed for a private credit ETF in 2023. However, the U.S. Securities and Exchange Commission has yet to approve a structure for fully-fledged private-asset ETFs due to liquidity concerns.

In the meantime, funds like PEO AlphaQuest Thematic PE ETF (LQPE), Man Buyout Beta Index ETF (BUYO), and Pacer’s PE/VC ETF (PEVC) offer alternative exposure. Some invest in small-cap stocks similar to private equity-backed firms, while others track indices reflecting private market returns. The Whitewolf Publicly Listed Private Equity ETF (LBO) holds shares of publicly traded private equity firms such as KKR, and the ERShares Private-Public Crossover ETF (XOVR) has drawn attention for buying private shares of SpaceX.

Despite these efforts, industry experts remain cautious. “These ETFs are like Bud Light for private equity—watered down versions of the real thing,” said Todd Sohn, senior ETF strategist at Strategas. Analysts warn that these products may not match private equity returns due to differences in liquidity, valuation methods, and investment approaches.

Investor appetite for private market exposure remains strong, but regulatory challenges still block the launch of ETFs that directly hold private assets. Firms like Apollo and State Street are testing new trading structures to navigate these restrictions, yet for now, Wall Street relies on proxy strategies to satisfy demand.