New State Street ETF Opens The Door To Private Credit

State Street Investment Management widened its line of ETFs on Wednesday with the launch of the State Street Short Duration IG Public & Private Credit ETF (NYSE:PRSD), an actively managed vehicle aimed at merging risk-adjusted returns with timely income. The ETF has a 0.59% net expense ratio.

PRSD focuses mainly on short-term investment-grade debt, both public and private credit instruments. Included in a private credit within an ETF structure is unique, providing investors with exposure to a previously unattainable market segment.

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Anna Paglia, chief business officer, State Street Investment Management, said that private credit is one of the fastest-growing areas of the market over the last few years, but historically has been an underinvested allocation in portfolios.

“That changed earlier this year when we launched PRIV, the SPDR SSGA IG Public & Private Credit ETF (NYSE:PRIV) — a core bond fund offering exposure to a combination of investment-grade public and private credit ETF. Now, PRSD builds on the launch of PRIV and continues the convergence of public and private markets by expanding our lineup to include a short-term bond strategy that can be used to pursue potential excess returns while managing duration risks,” she added.

The fund employs a hybrid top-down and bottom-up portfolio construction approach, enabling the team to over-weight strong sectors and issuers while keeping a conservative risk profile. PRSD has a target average duration of one to three years, thus qualifying as an authentic short-duration bond fund.

About 10%–35% of the portfolio will be invested in private credit securities that are accessed through Apollo Global Securities, providing PRSD with a competitive advantage over other short-duration funds through diversification, potential returns higher than the benchmark, and access to a market that has historically been difficult to access.

This aspect gives the fund an attraction for institutional investors and high-net-worth individuals who are looking for income and stability as well as exposure to non-traditional credit markets.

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