State Street & Apollo Launch ETF for Private Credit Access
State Street and Apollo have launched a new ETF in the USA, offering exposure to investment-grade private credit. This move aligns with wealth managers' increasing interest in private equity and private credit, despite liquidity concerns. The use of ETFs is seen as a solution to democratize access to these asset classes.
State Street's recent survey of 82 wealth managers across nine countries, managing over $5 trillion in AUM, revealed that 53% and 42% expect to increase allocations to private equity and private credit respectively over the next 3-5 years. However, liquidity remains a significant obstacle, with 68% citing it as a challenge.
ETFs are emerging as a popular tool to overcome this hurdle. Nearly all (88%) wealth managers anticipate using ETFs more frequently in client portfolios, driven by their cost efficiency. Frank Koudelka, Global ETF Product Specialist at State Street Bank, predicts that active asset managers like Pimco, Allianz, and BlackRock will introduce new ETF share classes in the next five years. This trend is supported by the record global inflows of $123bn into active fixed income ETFs this year. About half (47%) of wealth managers plan to maintain their current allocation between active and index investments.
State Street and Blackstone have already launched an actively managed European CLO ETF, providing access to AAA-rated tranches of Euro-denominated debt issued by CLOs.
The integration of private assets into wealth manager portfolios is seen as inevitable. State Street's new ETF, along with predicted offerings from other active asset managers, signals a growing trend towards ETFs as a means to access private credit markets. Despite liquidity concerns, wealth managers are increasingly embracing ETFs for their client portfolios.
