New ETF PRIV Bridges Private And Public Credit, Draws Investor Interest And SEC Concerns

State Street Global Advisors and Apollo Global Management have made headlines with the launch of their private credit ETF, the SPDR SSGA Apollo IG Public & Private Credit ETF PRIV. This ETF, which began trading on Feb. 27, marks a significant development in the convergence of private credit and public markets.

PRIV is designed to offer investors risk-adjusted returns and steady income, with a net expense ratio of 70 basis points. The fund has been in the spotlight since State Street and Apollo announced their partnership in September last year, drawing interest from advisors eager to gain exposure to private credit via an ETF structure.

The fund allocates at least 80% of its net assets to investment-grade debt, while also incorporating a crucial private equity element. This private credit exposure is facilitated through Apollo's expertise, giving investors a unique way to tap into this market segment. In addition, PRIV allocates its funds in a diverse mix of fixed-income securities and has the flexibility to invest up to 20% in high-yield bonds.

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SEC Scrutiny Amid Strong Demand

PRIV's debut comes as investor appetite for private credit surges. PRIV saw solid first-day interest, attracting net inflows of $1.2 million. However, the U.S. Securities and Exchange Commission (SEC) has raised concerns regarding the ETF's liquidity, naming conventions and valuation compliance. A letter sent by the SEC flagged issues with the fund's transparency and questioned why certain details in a key agreement between State Street and Apollo were heavily redacted.

State Street has acknowledged the SEC's concerns and expressed plans to respond accordingly. Apollo, meanwhile, has maintained that the ETF's strong trading debut, highlighting confidence in its strategy of bridging private and public markets.

To meet SEC guidelines, the fund will cap illiquid investments at 15%, though its private credit exposure is expected to range from 10% to 35%.

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