Individual investors can expect a growing selection of financial products that include private credit in the coming months and years, according to financial executives at the Milken Institute’s annual global conference. Although only a few exchange-traded funds (ETFs) and other products targeted at non-high-net-worth investors have been approved or launched so far, senior leaders from banks, asset management firms, and private equity firms indicated that the availability of such products is likely to expand. Marc Rowan, co-founder and CEO of Apollo Global Management, highlighted the shift towards private assets in portfolios traditionally dominated by publicly traded securities. Rowan noted that traditional asset managers would likely become their largest clients as private credit becomes a significant asset class in investment portfolios.
Apollo has already partnered with State Street Global Advisors to launch the SPDR SSGA Public & Private Credit ETF, which debuted in February. While this ETF has garnered modest inflows, with only $54.7 million in assets, analysts remain optimistic about the potential growth of these types of products. However, Bryan Armour, an ETF analyst at Morningstar, pointed out that constructing a liquid structure that complies with SEC rules while offering meaningful exposure to private credit remains a challenge. The 10% private credit allocation in the State Street fund also comes with higher fees, complicating the appeal for investors.
Despite these challenges, asset managers continue to push forward. Recently, Capital Group and KKR secured SEC approval to launch two “interval funds” that will combine publicly traded and private debt securities. Additionally, Vanguard has announced a partnership with Blackstone to create similar products, signaling growing interest in private credit offerings for retail investors.
Citigroup CEO Jane Fraser predicted that there would be a surge in activity over the next year as traditional asset managers collaborate with private credit investors to develop such products. However, there are concerns regarding the inherent difficulties of structuring private credit investment vehicles that meet the needs of retail clients. Jenny Johnson, CEO of Franklin Templeton, emphasized that illiquidity remains a major factor when it comes to private credit investments. Michael Venuto, founder of Tidal Financial Group, also stressed that a liquid private credit product is essentially a contradiction, underscoring the challenges of bringing private credit to a broader audience.
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