State Street Global Advisors Democratizes Private Credit Markets with New ETF

State Street Global Advisors (SSGA) and Apollo Global Management (APO) have joined forces to launch the SPDR SSGA Apollo IG Public & Private Credit ETF (PRIV), a groundbreaking investment vehicle that provides retail investors with transparent, tradeable access to investment-grade private credit markets. This new ETF seeks to maximize risk-adjusted returns and provide current income by investing primarily in investment-grade debt securities, including a combination of public and private credit instruments.

PRIV is managed by the SSGA Active Fixed Income Team, which employs a risk-aware, macroeconomic top-down approach combined with bottom-up security selection to construct a portfolio that seeks to overweight the most attractive sectors and issuers. The portfolio managers, Matthew Nest, James Palmieri, and Stella DeLucia, use their expertise to navigate the complex landscape of private credit markets and identify attractive investment opportunities.

One of the key features of PRIV is its exposure to private credit instruments, which have historically been accessible only to large institutional investors. By investing in private credit, PRIV offers investors the potential for higher yields and greater diversification. However, it is essential to understand the risks associated with private credit investments, such as illiquidity and valuation challenges.

To address liquidity concerns, PRIV has implemented a contractual agreement with Apollo Global Securities, LLC, an affiliate of Apollo Global Management. This agreement ensures that Apollo provides firm bids on asset-backed and corporate finance instruments sourced by Apollo (AOS Investments) to the ETF on a daily basis at certain intervals. Apollo is also required to repurchase AOS Investments that the Fund has purchased at the firm bid price offered by Apollo, subject to contractual levels designed to cover the estimated seven-day stress redemption rate. This arrangement provides a liquidity solution within PRIV, addressing the concerns raised by investors, particularly the United Food and Commercial Workers International Union (UFCW).

PRIV carries a management fee of 0.7%, which is competitive with other actively managed ETFs in the market. The fund'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. Up to 20% 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.

The launch of PRIV marks a significant milestone in the democratization of private markets, as it provides retail investors with access to an asset class previously reserved for institutional investors. By offering a lower-cost, liquid investment vehicle, PRIV enables individual investors to gain exposure to private credit markets and potentially benefit from the higher yields and diversification opportunities they offer.

In conclusion, the SPDR SSGA Apollo IG Public & Private Credit ETF (PRIV) represents a pioneering effort by State Street Global Advisors and Apollo Global Management to democratize access to investment-grade private credit markets. By addressing liquidity concerns and offering a competitive management fee, PRIV provides retail investors with an attractive investment vehicle for gaining exposure to this growing asset class. As the market for private credit continues to expand, PRIV is well-positioned to capitalize on the opportunities it presents.