State Street, Apollo team up to launch first of its kind private credit ETF

Core Viewpoint - A new ETF, SPDR SSGA Apollo IG Public & Private Credit ETF (PRIV), is set to trade on the NYSE, aiming to invest at least 80% of its net assets in investment-grade debt securities, including a notable portion of private credit, which presents liquidity challenges [1][2]. Group 1: ETF Structure and Investment Strategy - The ETF intends to include a combination of public and private credit, with a significant component of private equity, which is typically illiquid [1]. - Apollo will provide credit assets and has agreed to repurchase these investments if necessary, addressing liquidity concerns [2]. - The SEC has allowed this ETF to hold private credit investments between 10% and 35%, deviating from the usual 15% limit for illiquid investments in ETFs [3]. Group 2: Liquidity and Market Concerns - There are concerns regarding the pricing of liquidity provided by Apollo, as it is the primary source, although State Street can source from other firms for better pricing [3]. - Apollo's obligation to buy back loans is limited to a daily cap, raising questions about the process after reaching that limit and whether market makers will accept private credit instruments for redemption [4]. - The ETF is considered groundbreaking yet complex, and its liquidity will be closely monitored [4].