Figma, Circle, and CoreWeave are just a few names to remind investors that the initial public offering (IPO) market is alive and kicking despite the market challenges in 2025. This opens the door into a room with IPO-focused exchange-traded funds (ETFs) that can provide niche exposure to these up and comers.
“IPO-focused ETFs give investors exposure to companies in their early growth stages, while helping diversify the high single-stock risk common in newly-listed firms,” said Roxanna Islam, TMX VettaFi head of sector & industry research.
As mentioned, it’s been a year fraught with challenges for the IPO market. The common obstacles affecting much of the market like inflation, interest rates, geopolitical risks, and tariffs have been the persistent thorn in the side. In Addition, more companies are opting to stay private longer due to unfavorable market conditions. This, in turn, is spawning increased investor interest in the private equity market.
Outlook Improving in 2025
Despite this, 2025 is shaping up to be a positive year, according to Morningstar. With recession fears easing and market confidence building, IPOs are drawing eyes from investors again. Furthermore, strength from AI and cryptocurrencies is also spilling over into the creation of companies looking to capitalize on these markets. Also, those same companies choosing to remain private might see current macro conditions improving (such as lower interest rates) and thus, choose to finally go public after remaining on the sidelines.
A notable metric Morningstar mentioned was the “first-day pops,” or the market reaction to IPO debuts on an exchange. Some names have been able to sustain their first-day pops while the market euphoria surrounding others died down quickly. Nonetheless, it’s a sign of growing investor enthusiasm for IPOs.
“2025 isn’t just a rebound year for IPOs; it’s the year the market remembered how to dream big,” says Mike Bellin, IPO services leader at PwC US.
“The pace and the momentum that we have going into the end of the year, I think, is very strong,” Bellin added, but also cautioned that the aforementioned market risks like tariffs still remain.
Given this, due diligence is key and investors looking for exposure may want a discerning screener — something ETFs can provide.
IPO Exposure By Way of ETFs
Of course, investors can build their own portfolio of IPO stocks and choose their level of allocation. However, ETFs offer an easier path with broad-based exposure. Investors can avoid potential overconcentration risk while also getting the flexible intraday trading capabilities, tax efficiency, and cost-effectiveness of an ETF wrapper. Different ETF providers have varying criteria for inclusion in their funds that track an index. For example, in VettaFi indexes, IPOs must have been trading for at least 22 days prior to inclusion. With that, here are a few options to ponder.
First up is the Renaissance IPO ETF (IPO), which tracks the Renaissance IPO Index. The index is rebalanced on a quarterly basis, allowing for exposure to new ETFs that have hit the market. Constituents are also cycled out of the index after three years to allow IPOs to develop and grow their market share. To avoid heavy concentration in one name, IPO weighs its allocations on a float-adjusted market-cap basis. It then applies a cap on any weightings over 10%.
As of September 23, IPO’s top five holdings include Astera Labs, Reddit, Kenvue, Arm Holdings, and Viking Holdings. Its top holding (10% weight), Astera, has been on a tear as of late. It’s gained over 70% year-to-date, as the company looks to ride the AI trend with its semiconductor-based connectivity solutions to support the technology’s infrastructure.
Strictly U.S. and International Options
A second option is the First Trust US Equity Opportunities ETF (FPX) that tracks the IPOX-100 U.S. Index. Constituents of the index include the 100 largest names that have gone public or spun off into separate companies. It also includes acquirers of recent IPOs via a disciplined index methodology. Like IPO, the fund sees a quarterly rebalance and a cap of 10% to mitigate concentration risk.
Earlier this year, the index included market leaders that, according to IPOX, “have shaped the U.S. new listings market in recent years.” Because of this, investors will see familiar names like Palantir and DoorDash in the fund. Looking further under the hood of FPX, investors will see its top allocation (also maxed at 10%) go to General Electric spin-off GE Vernova, which is up over 80% for the year.
International equities have been attracting investor attention this year. With that, investors can get an international variant of FPX with the First Trust International Equity Opportunities ETF (FPXI). That fund adds exposure to the 50 largest IPO companies outside of the U.S.
If IPOs are indeed poised for a comeback, these ETFs are a few options that will allow investors to position themselves accordingly to capture the potential upside.
For more news, information, and strategy, visit ETF Trends.
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