State Street, Apollo Private Credit ETF Approved by SEC
The fund's price was little changed in its first day of trading.
State Street Corp. and Apollo Global Management Inc.’s groundbreaking private credit ETF has been approved by the Securities and Exchange Commission, opening private asset markets up to general investors.
The SPDR SSGA Apollo IG Public & Private Credit ETF (PRIV), with $50 million in assets, was little changed in its first day of trading on NYSE ARCA. It charges a 0.70% management fee. The ETF’s private credit holdings will “generally range” between 10% and 35% of net assets with the weighting at the sole discretion of the portfolio managers. It currently lists the U.S. dollar as its top investment, with a 13% allocation.
The ETF comes as major asset managers seek ways to make private market investments more accessible to individual investors. Private credit has seen rapid growth in recent years but has largely been limited to institutional investors while raising questions about whether or not such funds belong in the average investors' portfolios.
A pair of other funds launched this month to offer investors exposure to private markets. Pacer launched the Pacer PE/VC ETF (PEVC) in early February to provide retail-class investors with exposure to the kinds of investments that have historically been reserved for wealthy individuals and institutions. A week earlier, the PEO AlphaQuest Thematic PE ETF (LQPE), which also invests in public companies to replicate the performance of private investments, was issued.
Private credit instruments in the fund include securities "directly originated, issued in private offerings, issued to private companies, and/or issued to borrowers by non-bank lenders” such as asset-backed and corporate finance instruments sourced by Apollo.
Apollo, State Street
Apollo will be responsible for sourcing most of the public and private credit instruments held in the fund at least 80% of which must be investment grade.
Up to 15% of the ETF’s assets can be held in ‘illiquid instruments’ such as private funds, interval funds or business development companies managed by Apollo or its affiliates.
This suggests that Apollo’s unique role as a liquidity provider means some of the private credit instruments used by the fund will not be subject to the SEC’s 15% limit on illiquid investments.
Apollo has committed to provide ‘executable quotations’ on all private credit instruments and purchase them from the fund, up to a ‘daily limit’, at or above the quoted price. The size of the daily limit is undefined.
ETF Stream looked at whether an equivalent was possible in Europe, but found that the regulators were unlikely to be acquiescent.
This article was originally published in etf.com sister publication ETF Stream.
