New ETF speeds up access to private assets for all investors

One company recently introduced a groundbreaking ETF that offers investors direct exposure to private assets as a significant portion of its net asset value (NAV). This innovative ETF aims to allocate between 10-35% of its funds to private credit and charges a management fee of 0.7%. The reception of this ETF has been positive, with notable trading activity and asset accumulation following its launch. This move is seen as a pivotal moment that could potentially open the door for the ETF industry to venture into the vast private assets arena, ushering in greater accessibility to this asset class.

The ETF focuses specifically on private credit, encompassing a wide array of credit instruments ranging from those directly originated, issued in private offerings, and allocated to private companies. These include asset-backed and corporate finance instruments sourced by a major private asset firm. The fund’s prospectus outlines that private credit will typically constitute between 10-35% of its portfolio. Despite imposing a 15% cap on illiquid assets, the remaining portion is invested in public credit.

Following the ETF’s launch, the Securities and Exchange Commission (SEC) made waves by issuing a public letter to the issuer expressing concerns about the fund’s name, liquidity, and valuation. This move raised eyebrows within the industry since regulators typically pose inquiries during the application process rather than after approval. However, the issuer promptly responded to the SEC’s queries, reportedly satisfying any outstanding concerns. This incident, although characterized as growing pains, shed light on the complexities of navigating regulatory requirements, especially when introducing innovative investment products like this private asset ETF.

What sets this new ETF apart is its groundbreaking approach to including a significant portion of private assets in its portfolio. While other ETFs have dabbled in assets with limited liquidity, such as collateralized loan obligations (CLOs) and bank loans, this is the first time an ETF has directly invested in private assets on such a scale. This bold move signals a new chapter in the ETF industry’s evolution, potentially paving the way for similar products to emerge and democratizing access to private asset investments.

The introduction of this private asset ETF in the U.S. market sets a precedent that could inspire the launch of similar ETFs in other regions with progressive regulatory environments. Internationally, Canada and other markets may witness the debut of private credit ETFs, following the success and positive reception of this pioneering product. As the investment landscape continues to evolve, the democratization of private assets through innovative investment vehicles like this ETF could revolutionize the way investors access and diversify their portfolios, offering new possibilities for growth and financial success.