ETF Edge
The controversial rise of private credit/equity 3/3/25
Mar 3, 2025
Joanna Gallagos, co-founder of Bond Blocks, brings her expertise in ETF registrations and private credit investments, while Todd Sohn, head of ETFs at Strategas, shares insights on market trends. They discuss the SEC's scrutiny of private credit ETFs, the complexities of investing in collateralized loan obligations (CLOs), and the delicate balance between risk and yield. The conversation also covers innovations in ETF strategies, shifts toward defensive sectors like healthcare, and the rising appeal of gold ETFs amid changing market dynamics.
24:30
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Quick takeaways
- The launch of a new ETF focused on private credit raises significant regulatory concerns about liquidity and compliance, emphasizing due diligence for investor confidence.
- Collateralized loan obligations within private credit ETFs offer investors a unique strategy for diversification and access to potentially higher-yielding investments with lower volatility.
Deep dives
Regulatory Challenges for Private Credit ETFs
The launch of the Spider-SSGA Apollo Public and Private Credit ETF has raised significant regulatory concerns, highlighting key liquidity and compliance issues flagged by the SEC. Despite receiving initial approval, the SEC later questioned the fund's naming and its adherence to valuation rules, reflecting the complexities involved in offering private credit assets to retail investors. Responding to these concerns, State Street clarified that the fund’s assets would not be limited solely to those associated with Apollo and assured daily NAV calculations for transparency. This scenario underscores the importance of thorough due diligence and transparent communication regarding fund operations to instill investor confidence.
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