Surging SpaceX Stake Raises Doubts Over Private Assets in ETFs

A modest investment in SpaceX that thrust a niche fund into the limelight in recent months has morphed into a monster position, testing the very capacity of exchange-traded funds to hold unlisted assets.

Around 37% of the ERShares Private-Public Crossover ETF is now invested in Elon Musk’s rocket ship maker, a figure that has climbed well above 40% in recent days, according to data compiled by Bloomberg.

It’s practically unheard of for a private firm to account for so much of a single ETF, since the US Securities and Exchange Commission limits open-ended vehicles to investing just 15% of ...