Virtus and BondBloxx join SSGA in private credit ETF queue #NewsMarket

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Virtus and BondBloxx have followed State Street Global Advisors with filings for actively managed private credit exchange traded funds, joining the race to be first to market.

Both Virtus and BondBloxx filed earlier this month for funds focused on investing in credit collateralised loan obligations composed mostly of loans to private companies. BondBloxx was first, filing on September 12, a day before Virtus.

On September 10, SSGA floated a prospectus for a private credit fund operated jointly with Apollo Global Management and investing more broadly in private funds, interval funds and business development companies.

The filings reflect intensifying industry competition to develop ‘40 Act products packaging private market access. In the same week, BlackRock announced plans to launch a private-markets model portfolio product jointly with private equity firm Partners Group.

This article was previously published by Ignites, a title owned by the FT Group.

In July, BlackRock struck a deal to buy private markets data group Preqin, promising at the time to leverage the acquisition in order to “index the private markets”. A few months earlier, Capital Group announced a collaboration with KKR to launch hybrid funds targeted to mass affluent clients and investing in both public and privately traded assets.

The companies are chasing an anticipated windfall of retail cash thought to be hungry for private markets exposure. Data from Morgan Stanley and Oliver Wyman suggest retail wealth investors allocated $2.3tn to private markets in 2020 and will boost those allocations to $5.1tn by 2025.

Though Hartford, Connecticut-based Virtus already operates the $46.6mn Private Credit ETF, the fund is passively managed and limits investments to business development companies.

The first to launch an actively managed private credit ETF with broader exposure to the market would stand to gain considerably more inflows than subsequent rollouts.

“It has paid to be first with ETF innovations in the past,” said Morningstar analysts Brian Moriarty and Ryan Jackson in a research note last week on SSGA’s Apollo prospectus.

“If mainstream investors embrace the private credit ETF, State Street could reap a healthy stream of recurring revenue,” they said.

*Ignites is a news service published by FT Specialist for professionals working in the asset management industry. Trials and subscriptions are available at ignites.com.