Apollo and State Street Launch Private-Public Credit ETF

Apollo Global Management and State Street are reportedly launching a private-public credit exchange traded fund.

That’s according to a report Tuesday (Sept. 10) by the Financial Times (FT), which noted that this is the latest attempt by large investment firms to sell alternative assets to retail investors to fund their next stage of growth.

The report cited a filing from State Street’s $4.37 trillion asset management arm with the Securities and Exchange Commission (SEC), which said the product will hold mostly investment grade debt, among it private credit originated by Apollo.

“Private assets are one of the fastest growing sectors of the financial industry … This relationship combines the strengths of two market leaders to allow even more investors to participate,” said Ron O’Hanley, chief executive of State Street, which — the FT said — pioneered the exchange traded fund (ETF) with an S&P 500 fund in the 1990s.

According to the FT, KKR and Capital Group launched a similar public-private debt partnership in May, while Blackstone has enjoyed success with semi-liquid credit and real estate funds targeting very wealthy clients.

The report also noted that retail investors are expected to become a much larger purchaser of alternative investments like private credit, citing estimates from consultancy Cerulli Associates, which has estimated that financial advisers will increase their holdings of such investments from $1.4 trillion to $2.5 trillion by the end of next year.

Coming into 2024, PYMNTS examined the appeal of private credit, otherwise known as private debt, which is issued to companies, and which offer a capital lifeline to sustain operations.

“Traditional channels, chiefly through banks, have been tightening their lending activities, particularly to smaller firms, and that activity had been down double-digit percentages through the past several quarters,” PYMNTS wrote earlier this year. “The areas impacted included term loans and new lines of credit.”

Research by PYMNTS Intelligence has shown that 47% of small- to medium-sized businesses (SMBs) with annual revenues of $10 million or less had access to business or personal financing. That leaves around half without access, with 8% of SMBs saying they have access to only personal financing.

In addition, PYMNTS Intelligence’s “What’s Next in Credit: How Lack of Credit Access Impacts SMBs” found that 60% of SMBs are denied access to the funding they need.