ETF Alternatives to the SPDR SSGA Apollo IG Public & Private Credit ETF (PRIV)

Virtus Private Credit Strategy ETF

VPC

The Virtus Private Credit Strategy ETF

One of VPC’s primary components is business development companies (BDCs). BDCs are publicly traded entities that provide financing to small and mid-sized private businesses, often in the form of direct loans or equity stakes.

Because BDCs are required to distribute at least 90% of their income to shareholders to maintain their tax-advantaged status, they can offer high yields similar to private credit but with the liquidity and transparency of a public market instrument.

Beyond BDCs, VPC employs a fund-of-funds strategy, holding closed-end funds (CEFs) that invest in private credit and related assets. Many CEFs have included private credit for years, and unlike ETFs, they are not subject to daily redemption pressures, allowing them to manage illiquid assets more effectively.

VPC also allocates to non-investment-grade bonds, including mezzanine loans and bank loans. Mezzanine loans are a hybrid of debt and equity financing, offering high yields by taking on more risk.

Bank loans, also called senior loans or leveraged loans, are typically secured by company assets and have a higher claim on a borrower’s assets than unsecured debt. These loans offer floating interest rates, which can be advantageous in a rising rate environment.

Currently, VPC offers a high 11.71% 30-day SEC yield, reflecting its higher-risk fixed income strategy. This yield is competitive with private credit funds, demonstrating the income-generating potential of its multi-asset approach.

While VPC has a management fee of 0.75%, its total expense ratio stands at a seemingly alarming 9.86%. However, most of this (9.11%) is due to “Acquired Fund Fees & Expenses,” which represent costs passed through from the underlying BDCs and CEFs.

These fees are not directly charged to VPC investors, as they are already reflected in the prices of the underlying funds, meaning you are not paying these expenses separately from VPC’s assets.

BondBloxx Private Credit CLO ETF

PCMM

BondBloxx, a top fixed-income manager, introduced the BondBloxx Private Credit CLO ETF

Unlike more traditional private credit funds, PCMM offers a publicly traded ETF option that taps into private company lending through a diversified pool of loans.

PCMM invests 80% of its assets in CLOs, with the majority of these CLOs consisting of pools of loans to private companies. The typical CLO structure involves bundling corporate loans, usually to middle-market companies, into a single security that is then tranche-divided into different layers of risk and return.

The top tranches (e.g., AAA-rated) receive priority on payments but offer lower yields, while the lower tranches (BB-rated or below) provide higher yields but take on more risk.

The loans held within PCMM are primarily to middle-market companies, which is exactly the kind of borrower base traditionally targeted by private credit funds. This gives PCMM an edge by offering private credit exposure through a more liquid, transparent vehicle.

Currently, PCMM holds 42 securities with an average credit rating of A, placing the fund in the investment-grade category. CLOs generally receive higher ratings due to their built-in diversification, which spreads default risk across multiple underlying loans.

The fund’s credit allocation includes 22.5% in AAA-rated securities, 14.2% in AA, 22.7% in A, 22.4% in BBB, and 16.9% in BB-rated debt. This mix provides a balance of safety and yield, aligning with private credit’s risk-return profile while maintaining a higher credit quality than many direct private credit funds.

Like PRIV, PCMM is benchmarked against the Bloomberg US Aggregate Index, but with a targeted focus on private credit proxies through its CLO investments. The ETF charges a 0.68% expense ratio and currently pays a 7.44% 30-day SEC yield.

This article is for informational purposes only and does not in any way constitute investment advice. The author may express their own opinions, which may not represent the opinions of ETF Central or its affiliated partners. It is essential that you seek advice from a registered financial professional prior to making any investment decisions.