Move Over State Street. JPMorgan Becomes Latest to File for Private Credit ETF

What’s private is increasingly becoming public … or at least retail.

This week, J.P. Morgan Asset Management got in line to be the next ETF issuer dabbling in private credit. The firm filed Tuesday with the Securities and Exchange Commission for approval of its Total Credit ETF, a product that would allocate up to 15% of assets to private credit.

“The US corporate credit market is increasingly converging, as issuers move fluidly between public bonds and private credit,” said Jed Laskowitz, global head of private markets and customized solutions for J.P. Morgan Asset Management. “The private credit market can add yield and diversification benefits to portfolios, and investors are increasingly interested in investing actively across the public and private credit spectrum.” The firm declined to comment on the product filing itself.

Portfolio Power-Up

With private credit funds having high yields, they are worth considering for a small slice of an investor’s portfolio, said Alvin Carlos, financial planner and managing partner at District Capital Management. “An aggressive client portfolio currently contains between 5% to 10% private credit via [business development companies] for high yield,” he said. The downside is volatility. “During a stock market crash, a BDC stock could drop by as much as 50%,” he said.

Semiliquid funds that are sold to nonqualified buyers reached $450 billion in assets through June, a 77% increase from 2022, according to a report last week from Morningstar. But State Street and JPMorgan aren’t the only major asset managers that want in on the action:

• Capital Group and KKR launched two private-credit interval funds that together have reached nearly $500 million. 
• Vanguard, Wellington and Blackstone are also prepping one called the WVB All Markets Fund.

Will It ETF? The ETF filed this week would use J.P. Morgan Asset Management to underwrite primary or secondary markets investments, Bloomberg reported, citing a source familiar with the strategy. The company’s filing did not include fees, though the SPDR SSGA IG Public & Private Credit ETF (PRIV) charges 0.7% and its second fund, State Street Short Duration IG Public & Private Credit ETF, which launched last month, charges 0.59%. It’s early days in private credit ETFs, and those two funds represent $139 million and $25 million, respectively. 

That’s not a verdict on the hotly anticipated category, but retail investors aren’t exactly piling into private credit ETFs yet.