Space Exploration Technologies Corp’s (NASDAQ:SPCX) record-breaking rise from IPO to the Nasdaq-100 in just 15 trading sessions may be remembered for more than its historic index inclusion. It could also accelerate a new race among active ETF managers to gain exposure to late-stage private companies before they go public.
The milestone highlights a growing divide between active crossover funds and passive index ETFs. While index funds only began accumulating SpaceX after it became eligible for inclusion, funds that invested before the IPO captured years of private-market value creation.
“It’s a turning point, without question,” Joel Shulman, founder and chief investment officer of ERShares, told Benzinga. “We were first. ERShares Private-Public Crossover ETF (NASDAQ:XOVR) added SpaceX on Aug 24, 2024, and it took roughly a year before others followed. We have continued to be the market leader in the crossover space… this is still the first inning of the trend.”
Shulman believes SpaceX’s successful transition to the public markets validates the crossover model rather than diminishing its value now that passive ETFs can own the stock.
“It validates our approach completely,” he said. “Passive funds owning SpaceX today simply confirms what our shareholders participated in years earlier.”
Private Markets Becoming the Next ETF Frontier?
The comments come as ETF issuers increasingly search for ways to differentiate themselves in an industry crowded with thematic products, particularly AI-focused funds that often hold many of the same mega-cap technology stocks.
According to Shulman, more managers are already trying to incorporate private companies into ETFs following SpaceX’s success, but replicating the strategy is far more difficult than simply adding a private holding.
“Private-market investing inside an ETF requires valuation governance, liquidity management, and above all a selection framework,” he said. “Adding a private name because SpaceX worked is momentum; knowing which private name to add is a process.”
He argues the primary constraint isn’t the availability of private companies but the expertise required to source and manage them.
“There are plenty of companies from which to select—supply is not the constraint. Expertise is,” Shulman said, adding that sourcing private deals and managing them inside an ETF requires years of operational experience and specialized infrastructure. “That is the moat.”
Active ETFs vs. Passive Investing
Shulman also sees crossover investing as one of the clearest competitive advantages active ETFs have over passive strategies, particularly as high-growth companies remain private for longer before pursuing public listings.
“Passive ownership is permission-based—an index committee must act before a passive investor can participate, and by then the steepest part of the value-creation curve has already happened,” he said. “SpaceX just published the proof: passive funds are buying at $1.75 trillion what our shareholders accessed years earlier.”
The growing popularity of crossover investing also comes as the ETF industry continues to expand rapidly, with hundreds of new products launched this year, many centered on artificial intelligence, leverage and other fast-growing themes.
However, Shulman believes simply launching another thematic ETF is no longer enough.
“Twenty AI funds holding the same thirty stocks in slightly different weights is beta with marketing expense,” he said. “The test for any fund is simple: what do you own that could not exist without your process?”
Protecting Shareholders Over Asset Growth
Shulman also defended ERShares’ unusual decision to reject more than $1 billion in inflows before SpaceX’s IPO, saying accepting new money would have diluted existing investors’ exposure to the private holding because the fund could not purchase additional shares at pre-IPO valuations.
“As the IPO approached, arbitrage capital wanted to create ETF shares, capture the SpaceX markup and exit,” he said. “We turned away more than $1 billion… Fiduciary duty is to shareholders, not to asset growth.”
Whether other ETF issuers follow suit remains to be seen. But as more venture-backed companies stay private longer—and retail investors increasingly seek access before public listings—SpaceX’s blockbuster debut could mark the beginning of a new competitive frontier for active ETF managers rather than the end of one.
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