BondBloxx, Virtus tie for first place in private-credit ETF race

BondBloxx and Virtus Investment Partners have both claimed victory in the race to bring private credit to the masses through an ETF.

On Tuesday, BondBloxx, the ETF firm that's staked its fortunes on investors' need for fixed income, launched what it describes as the first exchange-traded fund to provide direct exposure to private credit, a market historically dominated by institutional and high-net-worth investors.

The BondBloxx Private Credit CLO ETF made its exchange debut on the Nasdaq, allowing a broader range of investors to access middle-market loans.

Trading under the ticker PCMM, the ETF promises to bring retail investors their first unadulterated sampling of private credit, which according to one estimate by Blackstone represents a $30 trillion opportunity.

BondBloxx's new fund focuses mainly on private credit collateralized loan obligations tied to middle-market companies, a market of roughly 300,000 entities that contribute an estimated $13 trillion in annual revenue and make up about one-third of the country’s private sector GDP, according to BondBloxx.

“With the launch of PCMM, investors can now access private credit with an ETF,” Leland Clemons, founder and chief executive officer of BondBloxx said in a statement announcing the December 3 launch. “The ETF industry has been a force of continuous innovation for investors, and I am proud that BondBloxx is a leader in that innovation in fixed income.”

The fund invests at least 80 percent of its assets in private credit CLOs and offers exposure to instruments from multiple underwriters, which BondBloxx co-founder Tony Kelly said opens up valuable diversification benefits.

“By not limiting the universe of private credit opportunities to a single underwriter, PCMM is better equipped to provide investors with opportunities across the entire US middle market,” Kelly said.

Meanwhile at the Arca Exchange, Virtus announced its own offering, the Virtus Seix AAA Private Credit CLO ETF. Trading under the ticker PCLO, the actively managed ETF is designed to primarily invest in hidden gems, focusing on "the strongest and most undervalued AAA rated private credit CLOs," according to the firm.

"“Private credit CLOs offer the potential for higher income and lower volatility versus traditional fixed income investments, providing investors with much needed diversification and lower correlation,” John Wu, portfolio manager and head of structured credit at Seix, said in a statement Tuesday.

Wu co-manages PCLO alongside George Goudelias, CIO, leveraged finance, and senior portfolio manager at Seix, an affiliated manager of Virtus.Seix has deep experience with CLOs, going from its first leveraged loan strategy launched nearly 20 years ago to today, when it manages 10 CLOs with roughly $3.4 billion in assets.

“We believe ETFs will become essential tools for investors seeking to access the burgeoning private credit market as it evolves,” said William J. Smalley, executive managing director at Virtus. “Innovative products like PCLO provide a solution for investors seeking yield complements to a traditional portfolio, emphasizing efficiency and transparency.”

The private credit ETF space may see a new player come in soon. In September, State Street submitted a filing for its own offering to be launched jointly with Apollo Global Asset Management. Apollo has high hopes for private credit, defining the potential market as a $40 trillion pool of largely investment grade offerings.