DSC Quantitative Group, a Chicago-based boutique focused on private equity replication strategies, will bring out a new set of offerings designed to track or exceed private equity and venture capital benchmarks designed by Cambridge Associates, the Boston-based investment and consulting firm.
The first in the series, the DSC CA Global Private Equity & Venture Capital Strategy, could be launched as early as July 1, said Arthur Bushonville, CEO of DSC.
Like DSC's existing product lineup, which tracks U.S.-focused benchmarks designed by Refinitiv, the new strategies will combine exposure to publicly listed stocks with leverage to provide investors with private equity-like returns in a liquid format.
Unlike the firm's legacy index products, the coming series will take a "systematic approach to reducing downside volatility," potentially appealing to investors using them to garner private equity-like returns on dry powder waiting to be called by general partners, said Jeffrey F. Knupp, president of DSC.
The coming product will aim to "outperform the risk and return metrics of the benchmark," with a systematic overlay on top to mitigate drawdowns, Mr. Bushonville said.
Cambridge Associates' more than three decades of compiling global private equity, venture capital and growth equity data made that firm's benchmarks the best fit for DSC's new product line, he said, adding that DSC becomes the first private equity replication provider to employ Cambridge Associate benchmarks.
The DSC executives said the coming strategies could appeal to a broad range of investors, from the biggest asset owners looking to use private equity replication strategies to manage commitments or distributions to smaller investors without the scale to construct a well-diversified private equity portfolio.
Mr. Knupp said while 2022 was a tough year for the industry, growing acceptance of the idea that there's a way to "replicate the same risk and return characteristics that you find in private equity with listed securities" is laying the groundwork for a pickup in allocations.
He said while DSC is in talks with a number of sizable groups about investing in its coming lineup of products, the firm will launch the first with internal capital with an eye to getting its track record started.