A new private credit exchange-traded fund issued by State Street Global Advisors and Apollo Global Management is expected to begin trading on the NYSE on Feb. 27 under the ticker PRIV, according to a source familiar with the matter.
According to an SEC filing dated Feb. 26, the SPDR SSGA Apollo IG Public & Private Credit ETF will seek to maximize risk-adjusted returns and provide current income.
Under normal circumstances, the filing stated, SSGA Funds Management., the investment adviser, will invest at least 80% of the ETF's net assets in a portfolio of investment-grade debt securities, including a combination of public credit-related investments and private credit investments including, but not limited to, those sourced by Apollo Global Securities.
Kirsten Chang, senior industry analyst with VettaFi, said the launch of this new ETF “marks the deepest entry we've seen yet from ETFs into the private asset space. It's a groundbreaking new chapter that could usher in a new wave of private market penetration.”
She added that the 10%-35% investment in direct private credit gives them a “good amount of leeway, and can easily encompass more tradable private assets like structured debt."
Chang also noted that this ETF is the “first of its kind.” VettaFi is a provider of exchange-traded fund data and analytics as well as indexing solutions.
SSGA Funds Management is a subsidiary of State Street Corp., while State Street Global Advisors is the investment management division of State Street Corp. Apollo Global Securities, a subsidiary of Apollo Global Management, also serves as a liquidity provider for the ETF, according to the filing.
Private credit, including asset-backed and corporate finance instruments sourced by Apollo will generally range between 10%-35% of the fund's total portfolio, the filing noted.
The ETF may also invest up to 20% of its net assets in high yield securities, otherwise known as “junk” bonds. Also, under normal market conditions, the adviser will seek to maintain an intermediate duration, between four and eight years, though this may vary.
The ETF carries a management fee of 0.7%.
Matthew Nest, James Palmieri and Stella DeLucia will be primarily responsible for the day-to-day management of the ETF. Nest is a managing director and the global head of active fixed income at SSGA. Palmieri is a managing director, senior portfolio manager, and head of structured credit for the fundamental active fixed income team at SSGA. DeLucia is a managing director and a senior portfolio manager in the fixed income insurance team at SSGA.
Concerns over liquidity, conflicts
However, the ETF has raised concerns among investors.
In November 2024, the United Food and Commercial Workers International Union wrote a letter to the SEC expressing its concerns about this ETF, citing, among other things, the ETF is not set up to meet the SEC’s liquidity risk management rule that restricts the amount of illiquid assets ETFs can hold.
UFCW also raised the potential of conflicts of interest, noting that State Street and Apollo have a “longstanding relationship.”
The letter further noted that State Street is a shareholder of Apollo, owning roughly $1.2 billion in Apollo stock as of May 2024.
“Simply put, as a shareholder of Apollo, State Street may benefit if Apollo does not provide liquidity for the ETF during times of market stress, which would be detrimental to ETF investors,” the letter added.
In October 2024, Andrew Feller, a former SEC enforcement attorney who is now senior special counsel at the law firm Kohn, Kohn & Colapinto, said “there is a danger that, absent additional transparency and strong controls, Apollo could use its position as liquidity provider for the ETF to influence, potentially for its own advantage, pricing for those and similar illiquid assets that are held elsewhere.”
However, Brian Moriarty a principal, fixed-income strategies, for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, described the new ETF as “groundbreaking.”
In a commentary on Feb. 26, Moriarty said the ETF’s adviser would address concerns about the illiquidity and valuation of private-credit holdings, “through a contractual agreement with Apollo, which will supply private-credit assets for the fund to buy and provide it with bids, or prices, on those same assets.”
Apollo, he added, has further agreed to purchase those investments from the fund up to an undefined daily limit. “In other words, Apollo is selling these instruments to the fund and promising to buy them back at the request of State Street,” Moriarty wrote.
But, Moriarty cautioned, it “also remains to be seen how willing the market will be to accept illiquids in such a liquid wrapper. It’s a wide new ETF world out there.”
Myles Manning, Paris-based senior strategy consultant at Indefi, said the new ETF is the “clearest illustration yet of a fast-emerging trend for U.S. GPs: forming partnerships with traditional asset managers to offer products to investors further down the wealth pyramid, going even a step beyond the semi-liquid evergreen products that have seen such explosive growth in the past few years.”
Partnerships with traditional asset managers allow GPs to tap into the retail distribution networks of their partner managers while “facilitating access to the in-demand, higher-octane investment offerings that liquid managers often lack.”
Manning added the ability to originate assets quickly and efficiently is a “key success factor for any product trying to bridge the liquidity gap, which makes Apollo’s acquisitions of several proprietary origination platforms a significant advantage for launching a cutting-edge product like this one.”
An official at SEC declined to comment. Neither Apollo nor SSGA could be reached for comment.
