State Street and Apollo Launch New First-Ever Private Credit ETF, Opening Up Private Market To Retail Investors
If you need some cash, you might spend on credit or get a loan from a bank, but what happens if you need a lot of money? That’s a problem afflicting growth-oriented businesses, which can’t always go to a bank and ask for a small loan of a billion dollars. However, it’s no matter because, in recent years, companies have been able to ask non-bank lenders — usually investment funds and private equity with more lax underwriting and higher risk appetites — for a loan instead.
It’s called private credit — and it’s the hottest new thing on Wall Street, with its total market growing to over $2T according to an analysis by the International Monetary Fund. And ironically, it’s not necessarily private anymore, thanks to a new ETF. But is this misnomer worth putting your money in?
Private credit goes public: This week, ETF heavyweight State Street ($STT) launched the first-ever private credit exchange-traded fund, the SPDR SSGA Apollo IG Public & Private Credit ETF ($PRIV). The fund gives retail investors access to a portfolio of assets issued and owned by alternative asset powerhouse Apollo, one of the foremost leaders in the private credit space. The launch of the fund has been heralded as a massive stepping stone to the wider acceptance of private assets on public markets. However, as the name suggests, it won’t just be private assets that investors are buying.
- Because of rules imposed by the SEC, ETFs generally cannot hold more than 15% of their assets in illiquid assets — but has circumvented this by claiming Apollo’s assets are considered liquid.
- Still, private credit assets in are expected to represent anywhere from 10% to 35% of the fund, meaning that a large portion will still be invested in publicly traded assets.
What’s Inside?
The latter part is important because it means that the majority of’s assets are still publicly traded; things like treasury bonds, money market funds, and other assets. And at a 0.70% expense ratio, that’s a lot of money to be paying — so what do you get?
- pays monthly distributions from its portfolio at an average coupon rate of about 4.76% — compare that with the SPDR Bloomberg 1-3 Month T-Bill’s 3.8% distribution.
- Still, after accounting for fees, the appeal of falls considerably — with lower-fee floating rate funds like and FLRN paying higher dividends after fees.
Should you buy it? The buzzy new listing hauled for over $55.5M in inflows on its first day, but that doesn’t mean you should buy it. Before its launch, State Street had a months-long correspondence with the SEC, which raised red flags about liquidity and fund safety. The back-and-forth ended with Apollo committing to bid on the fund’s sourced assets, classifying them as liquid. That was Apollo’s mission: to build the first marketplace for private credit. No doubt, is a substantial stride for private asset availability, but with its questionable distribution rate, steep management fee, and great unknowns, investors are likely better off sticking to the boring, cheap, and well-known alternatives.
