Fixed-income ETF provider BondBloxx on Dec. 3 launched a private credit CLO ETF, making the alternative asset class more accessible to retail investors.
The BondBloxx Private Credit CLO ETF, which will trade on the Nasdaq as PCMM, will focus on middle market borrower companies, according to a Dec. 2 company statement. BondBloxx estimates there are approximately 300,000 middle market companies in the US, generating revenue totaling $13 trillion.
The BondBloxx ETF launched the same day as Virtus Investment Partners’ Virtus Seix AAA Private Credit CLO ETF, with both funds claiming the mantle of the “first” ETF to offer exposure to private credit CLOs.
In addition to giving investors access to diverse portfolios of loans, investors will have access to loan books of various lenders, according to BondBloxx. The fund will invest at least 80% of its assets in private credit CLOs, giving its investors the ability to own such vehicles “from any of the major issuers.”
“By not limiting the universe of private credit opportunities to a single underwriter, PCMM is better equipped to provide investors with opportunities across the entire US middle market. Through PCMM, we are now able to offer investors an efficient way to participate in private credit with the liquidity, transparency, and cost advantages of an ETF,” said BondBloxx co-founder Tony Kelly.
Several other ETFs with private credit exposure are in the works, including the SPDR SSGA Apollo IG Public & Private Credit ETF helmed by Apollo Global Management and State Street. Plans for the comingled public and private credit investment vehicle were submitted to the SEC on Sept. 10.
The same week, Virtus Investment Partners filed plans for its Virtus Seix AAA Private Credit CLO ETF. Tema Endowment ETF and BondBloxx submitted plans for ETFs with private credit CLO exposure around the same time.
Following the rush of announced projects, Moody’s published a report on Sept. 18 indicating private credit ETFs could benefit the market by expanding the ranks of retail investors with exposure to private credit.
However, to maintain liquidity, the ETFs must hold public investments as well as private. As a result, the ETFs may be “sacrificing performance for liquidity” relative to direct investments in private credit funds, according to the ratings agency.
“The use cases are many, and now, for the first time, all investors have access to private credit as a portfolio building block,” said BondBloxx founder and CEO Leland Clemons.
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