Defiance ETFs has filed to create a pre-IPO leaders ETF, the first ETF product built entirely around private market exposure. The fund would use total-return swaps with bank counterparties to provide synthetic exposure to private companies without requiring accredited investor status. This approach avoids the liquidity issues inherent in owning private shares directly, as the ETF never holds the underlying securities. Defiance already uses a similar swap architecture in its leveraged products such as the XOVL ETF. The structure introduces specific counterparty risks and valuation challenges, since private companies are typically valued periodically based on their most recent funding rounds.
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