Active ETFs may benefit from SpaceX, OpenAI and Anthropic IPOs

SpaceX, OpenAI and Anthropic are reported or rumored to be preparing initial public offerings this year. The potential listings would bring large, privately held technology companies into public markets and prompt changes to benchmark rules and fund strategies.

FTSE Russell recently reduced the waiting period for very large companies to enter its indexes to five trading days after a listing. Index providers have revised or are reviewing eligibility rules to reflect the market impact of unusually large IPOs more quickly.

Public filings required by an IPO would provide investors with detailed information on capital expenditures, revenue sources and governance structures that have not been available while the firms were private. Analysts note the listings will make those financials public and could highlight whether substantial spending on AI and other technologies can result in sustainable profits.

Active exchange-traded funds use manager discretion rather than strict index weights. Fund managers can change sector exposure, overweight or underweight new listings and alter positions during periods of high volatility. Passive funds generally must follow index rules and market-cap weightings, which can force them to include large new listings in proportion to size.

The T. Rowe Price Technology ETF (TTEQ) is one example of an active fund that invests across technology-related categories and has taken some exposure to OpenAI. The fund charges a 63 basis-point fee and recorded a roughly 65.6% return over the past 12 months. Dom Rizzo, manager of TTEQ, described the approach to AI exposure this way: “While we’re ‘AI on’ right now, we can go ‘AI off’ if needed.”

Market participants expect IPOs from the three companies to produce short-term price swings. Active managers can pare exposure if a company’s public disclosures weaken the investment case. Analysts say investors should examine each fund’s mandate, fees and track record when assessing how a manager might respond to large new listings.

How index-rule adjustments and managers’ portfolio choices affect flows into active and passive products will become clearer after the companies file public disclosures and begin trading. Observers will watch trading volumes, rebalancing behavior and fund flows in the months following any listings.