Virtus and BondBloxx join SSGA in the private credit ETF queue

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

Both Virtus and BondBloxx filed applications earlier this month for funds focused on investing in credit-backed debt obligations, primarily comprised of loans to private companies. BondBloxx was the first, filing on September 12, a day before Virtus.

On Sept. 10, SSGA launched a prospectus for a private equity fund jointly operated with Apollo Global Management that invests more in private funds, bridge funds and business development companies.

The documents reflect intensifying industry competition to develop Act 40 products that package access to the private market. That same week, BlackRock announced plans to launch a model portfolio product for private markets with private equity firm Partners Group.

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

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

The companies are eyeing an anticipated windfall of retail cash believed to be starved of exposure to private markets. Data from Morgan Stanley and Oliver Wyman suggests that retail investors allocated $2.3 billion to private markets in 2020 and will increase these allocations to $5.1 billion by 2025.

Although Hartford, Conn.-based Virtus already operates the $46.6 million 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 market exposure could gain significantly more inflows than subsequent launches.

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

“If mainstream investors adopt the private credit ETF, State Street could get a healthy stream of recurring income,” 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 ignite.com.