State Street and Apollo Global Management have teamed up to launch a new exchange-traded fund (ETF) that aims to invest in both public and private credit. The SPDR SSGA Apollo IG Public & Private Credit ETF (PRIV) started trading on the New York Stock Exchange on Thursday. The ETF plans to invest at least 80% of its assets in investment-grade debt securities, including a mix of public and private credit.
The inclusion of private credit in an ETF format is a unique feature, as private credit is typically illiquid and difficult to include in ETFs, which require liquidity. To address this challenge, Apollo will provide credit assets and be prepared to buy back those investments if needed. The SEC has allowed the private credit portion of the ETF to range between 10% and 35%, although this can fluctuate.
State Street and Apollo collaboration
However, the SEC has raised concerns about the ETF’s liquidity, the use of Apollo’s name in the title, and its ability to comply with valuation rules. The SEC sent a letter to State Street on the same day the ETF launched, highlighting these issues.
State Street responded on Friday night, stating that they would revise the fund’s name soon and clarified that the fund’s illiquid products would not be exclusively tied to Apollo. They also noted that other broker-dealers could provide quotes to ensure that the fund’s net asset value (NAV) is calculated daily. It is unusual for the SEC to raise such concerns after a fund has already begun trading.
Typically, a fund can become effective after 75 days unless the SEC objects within that period. Given the complexities and regulatory scrutiny surrounding this innovative ETF, it will be closely watched by investors and industry experts alike.