ETFs Join the Pre-IPO Rush to Reach for Private Growth

ETFs are increasingly breaking down the wall between public and private markets. Asset managers are finding ways to “ETF-ize” private equity and pre-IPO holdings — giving retail investors liquid, fractional access to growth opportunities historically restricted to institutional and accredited buyers. As companies stay private longer, the most explosive growth phases of high-profile startups often occur off public exchanges.Key Takeaways Crossover ETFs give retail investors fractional access to high-growth private companies using SEC 15% illiquid sleeves. Issuers leverage special purpose vehicles and synthetic swaps to gain exposure to late-stage unicorns like SpaceX. Daily ETF pricing creates potential NAV dislocations when valuing illiquid private assets during periods of volatility. It’s a meaningful crack in the wall that has long separated public markets from private growth — but it comes with trade-offs that are easy to gloss over in all the excitement.Structural Innovation: The Rise of Crossover ModelsTo deliver pre-IPO access within the exchange-traded framework, issuers are rolling out crossover strategies, interval-fund hybrids and active public-private ETFs. AI and aerospace have emerged as early proving grounds, given that late-stage private valuations in these sectors have run well ahead of traditional IPO timelines.Direct OwnershipThe most direct approach is the public-private crossover ETF. Open-end funds generally can hold no more than 15% of net assets in investments classified as illiquid under SEC liquidity rules. By keeping 85% or more of their portfolios in liquid public equities, issuers can devote the remaining sleeve to late-stage venture rounds or secondary market pre-IPO shares. That’s the model behind the KraneShares Artificial Intelligence & Technology ETF (AGIX B+). AGIX made headlines in March 2025 as one of the first U.S.-listed ETFs to buy directly into a private company, taking a stake in Anthropic that has run in the 4–5% range of net assets as a direct shareholder. ERShares’ Private-Public Crossover ETF (XOVR C+) runs a similar playbook but relies more heavily on indirect structures, combining a large-cap public equity core with a private sleeve previously concentrated almost entirely in SpaceX, alongside smaller stakes in Anduril and prediction markets giant Kalshi, via special purpose vehicles. Retail appetite for pre-IPO market leaders is also fueling asset growth in space-themed funds. Beyond XOVR’s position, the Procure Space ETF (UFO ) and the Baron First Principles ETF (RONB) have seen surging asset growth by holding SpaceX alongside listed equities — with RONB holding a concentrated allocation that has periodically topped 30% of net assets. Benchmark providers are keeping pace with this shift; earlier this year, the VettaFi Space Index instituted a fast-track inclusion rule to rapidly add newly public space firms immediately following their IPOs.Synthetic Exposure: The Next Frontier?Others are exploring synthetic exposure, using swaps and derivative overlays to replicate the economics of private-company ownership without directly holding illiquid shares. Waiting in the wings for SEC approval is the Defiance Pre-IPO Leaders ETF, which aims to bypass physical custody of illiquid stock altogether by using total-return swaps to deliver synthetic exposure to private unicorns. One recent launch — the Yorkville Americas MANGOS Plus Index ETF (FRUT) — demonstrates how thematic tech funds can seek exposure to Anthropic and OpenAI primarily through total return swaps, with the underlying index using pricing related to perpetual futures to round out pureplay exposure to mega-cap AI frontier growth leaders. Valuation Risks and the New IPO PlaybookWhile the regulatory structure is sound, daily pricing of non-daily traded assets remains a challenge. Marking private holdings to market on a daily basis can trigger wide discrepancies between an ETF’s trading price, its reported NAV and real-world private secondary transactions — particularly during periods of high volatility. Nevertheless, the broader implications are clear. Private companies already have access to vast pools of venture and institutional capital, reducing their urgency to go public. ETFs are opening another window into that ecosystem. As these structures scale, investors can participate in late-stage corporate growth before an official listing, turning the IPO into just another milestone in a longer capital-markets journey. But for the moment, managing truly illiquid assets remains one of the few areas where traditional mutual funds and closed-end interval structures retain a structural edge over ETFs. For more news, information, and analysis, visit the Thematic Investing Content Hub. VettaFi LLC (“VettaFi”) is the index provider for UFO, for which it receives an index licensing fee. However, UFO is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of UFO.