State Street and Apollo private credit ETF gets green light from SEC

State Street and Apollo Global Management’s exchange-traded fund (ETF), which will invest in private and public credit, has launched after receiving regulatory approval.

The SPDR SSGA Apollo IG Public & Private Credit ETF will trade under the ticker PRIV, after receiving the green light from the US Securities and Exchange Commission (SEC).

Private credit will generally make up between 10 per cent and 35 per cent of the fund’s portfolio, according to the SEC filing.

The ETF’s illiquid investments would usually be capped at 15 per cent by the regulator, but Apollo has agreed to purchase back private credit assets at State Street’s request which has circumvented the regulatory limit.

“Historically, the ETF vehicle has been used to unlock market opportunities for all investors, no matter how big or small,” said Anna Paglia, chief business officer at State Street Global Advisors. “Thanks to ETFs, all investors have transparent access to traditionally less-liquid segments of the markets. We have worked with Apollo to provide a liquidity solution within PRIV and PRIV continues the mission of democratizing access to private markets.”

The ETF will invest primarily in investment-grade debt securities, including a combination of public and private credit such as asset-based finance and corporate lending.

State Street and Apollo first announced last September that they were planning to launch the ETF.

But industry stakeholders have raised concerns about how a typically liquid vehicle like an ETF can include private credit and whether this could present risks to retail investors.

“The problem of providing exposure to illiquid assets in a liquid wrapper is an age old one,” said Kenneth Lamont, strategist at Morningstar.

“The question is, can you provide safe access to an illiquid assets class without eroding the very benefits that made that asset class attractive in the first place?”

Read more: BondBloxx launches private credit ETF