Private credit ETF achievable for DWS but CEO Hoops ‘sceptical’. Private market exposure could increase sharply in a ‘negative sentiment environment’. While delivering private credit is ‘conceptually’ achievable for DWS, CEO Stefan Hoops said he remains ‘sceptical’ about wrapping private assets in an ETF promising daily liquidity. In response to a question on the German asset manager’s Q1 earnings call, Hoops said if ETFs are “a mechanism to distribute essentially any type of asset to investors, then conceptually, yes, they should also be a conduit to deliver private credit.” “I think we have the capabilities of doing it – but I personally remain sceptical of mixing by nature illiquid private market assets that are not marked-to-market on a daily basis with an ETF the comes with the promise of daily liquidity.” To make the structure work, Hoops noted that the private securities would probably have to be blended with liquid holdings so that the issuer knew what they needed to sell in the event of outflows.
The comments were made in response to the groundbreaking private credit ETF launched recently in the US by State Street Global Advisors (SSGA) and Apollo Global Management. According to the filing, the SPDR SSGA Apollo IG Public & Private Credit ETF’s (PRIV) private credit allocation will “generally range” between 10-35% of net assets with the weighting at the sole discretion of the portfolio managers. Apollo has a unique role as liquidity provider on the ETF – committing to provide ‘executable quotations’ on all private credit instruments and purchase them from the fund, up to an undefined ‘daily limit’, at or above the quoted price.
Despite attracting lots of attention from the industry, PRIV has fail to command significant inflows to-date. The ETF currently houses just $55m in assets under management (AUM) and no new shares have been created since 4 March.
Private capital ETFs are set to take the financial services sector by storm over the next three to five years, Deloitte predicts. According to the Deloitte’s 2025 Financial Services Industry Predictions report, US and European retail investors are expected to pour money into private capital, reaching as much as US$2.4 trillion in 2030 from the current US$80 billion.
This growth is set to be driven by expanding product offerings and regulatory changes that make private capital more accessible to retail investors. This includes both mutual funds and ETFs. For example, investment managers BondBloxx Investment Management and Virtus Investment Partners each launched actively managed ETFs with private credit exposure last December. State Street Global Advisors (SSGA) launched an actively managed private credit ETF in February with the aim to provide all investors with access to private markets by investing in both public and private credit such as asset-based finance and corporate lending.
Deloitte predicts that private capital within mutual funds and ETFs will be up to 15% of illiquid investment allotment and will likely be a driving factor for US retail investors’ increased allocation to private assets over the next five years.
The European ETF market had its best quarter in terms of flows, with USD93 billion of AUM in Q1 eclipsing the previous record of USD91 billion set in Q4 2024, according to Invesco’s latest European ETF Snapshot. The firm writes that despite broadly flat equity returns, strong performance for commodities, particularly gold, and solid gains in fixed income markets helped push total European ETF AUM to USD2.38 trillion as at the end of the quarter.
Equity flows in European ETFs remain resilient as investors pivot to Europe. Despite market uncertainty towards the end of the quarter, the proportion of total ETF flows into equities in (80 per cent) remained in line with the 2024 average. However, the data revealed a pivot away the US towards Europe. Concurrently, appetite for US equities fell, with USUSD2.2 billion of outflows in March taking the total for the quarter to USUSD4.5 billion, less than 10 per cent of the record level seen in Q4 of last year.
Demand for gold ETFs in Europe rises amidst price rally. Gold was the big winner in the commodity asset class. Flows into gold ETPs have been positive for the past four months after being largely absent for most of the gold price rally before then. Gold was the best-performing asset in Q1 with a 19 per cent return, driven by the allure of its perceived “safe haven” characteristics as equity markets fell and the economic outlook became increasingly uncertain.
New ETF Issuance
If you examine the table below there are several distinctive trends and its not difficult to understand why they are being issued:
- In Europe, pure long equities exposures are connected to European Defence and Emerging Markets.
- In relation to US equities exposure, including those issued in Europe, there is a distinct trend to protected downside exposure. There are several Buy-write strategies and several Collar strategies. Under the former, a call option is sold over a long exposure, which caps capital gains at a certain level but buffers capital downside based on the option premium received by selling the call. Under the latter, the strategy involves selling a call and buying a put. Less total option premium than a buy-write (as the strategy has to fund the put) but unlike a buy-write there is a limited defined and capped downside risk (and limited capped upside).
New ETF Launches: Week of 17 – 24 April
| New ETF Launches: Week of 17 – 24 April |
|---|
| Australia |
| Global X is launching the Artificial Intelligence Infrastructure ETF |
| Europe |
| First Trust launches First Trust Vest US Equity Buffer UCITS ETF – April (FAPR) |
| Robeco adds active emerging markets equity to ETF line-up |
| KB Asset Management to launch KB RISE US Natural Gas Value Chain ETF tracking the Solactive index |
| HSBC Asset Management launches emerging market equity strategies for UK investors |
| Global X is launching the Artificial Intelligence Infrastructure ETF (ASX: AINF) |
| First Trust launches April S&P 500 buffer ETF |
| Robeco unveils active emerging markets ETF |
| BNP Paribas AM to launch Europe defence ETF |
| USA |
| Avantis Investor launched the Avantis Credit ETF |
| YieldMax launched the YieldMax Target 12 Real Estate Option Income ETF |
| Harbor Capital Advisors launched the Harbor Transformative Technologies ETF |
| Roundhill Investments launched the Roundhill Magnificent Seven Covered Call ETF |
| First Trust launched the FT Vest U.S. Equity Max Buffer ETF |