Talking Private Markets ETFs at FutureProof Miami

I just did a fun panel with ETF.com President and Director of Research Dave Nadig and Outer Beach Consultants owner and ETF.com contributor Conor MacWilliams at the ETF.com Beach House at the Future Proof Citywide conference in Miami Beach.

Dave had been doing panels all day while I was filming interviews a few feet away. This was the first (and only) time I jumped into the tent to participate. It was fun, but also a bit of a blur.

It kind of felt like a live version of our podcast ETF Zoo.

We talked about one of the hottest topics in asset management right now—private markets—and how much traction they’ve actually gotten in the ETF space.

My take was that, relative to the amount of attention they’ve received, private markets ETFs haven’t gained much traction yet.

Plenty of ink has been spilled on products like the ERShares Private-Public Crossover ETF (XOVR), the State Street IG Public & Private Credit ETF (PRIV), and the Baron First Principles ETF (RONB).

PRIV even won Best New U.S. Fixed Income ETF at the ETF.com Awards! So the enthusiasm is there, but the assets are relatively small. That’s not to say the space can’t grow from here. But relative to the hype, it’s still a tiny corner of the ETF market.

Conor seemed to agree.

“The entire space is about $2.5–$3 billion right now,” he estimated. “State Street has taken in some cash with its product [PRIV], but it’s arguably the least exposed to private markets. It’s about 90% investment-grade credit, MBS, and Treasuries.”

He also mentioned the $19 million Virtus Seix AAA Private Credit CLO ETF (PCLO) and the roughly $200 million BondBloxx Private Credit CLO ETF (PCMM) as examples of funds that have been slow to gain traction.

“Retail investors haven’t really bitten yet, and advisors are still learning,” he said. “A lot of it comes down to client education. If you can explain these products in a way retail investors and advisors understand, you could see more inflows.”

So the space isn’t dead. But it’s certainly underwhelming relative to the attention it’s gotten.

Then there’s the bigger question of whether the open-end ETF structure is even a good fit for private assets in the first place.

I wrote about this in a recent piece arguing that what we saw with XOVR may be a warning for ETFs that want to include private companies in their portfolios.

We ended up covering many of those same issues during the panel, including valuation opacity, flow-driven dilution, and the concentration problems that can emerge when investors redeem shares from a fund holding illiquid assets.

Anyway, it was a fun conversation at a fun conference.

We’ll have more from Future Proof later this week and next week.