On Wednesday, State Street Investment Management expanded its suite of exchange traded funds with the launch of the State Street Short Duration IG Public & Private Credit ETF (PRSD).
An actively managed fund, PRSD looks to offer a blend of risk-adjusted returns and current income. The ETF has a net expense ratio of 59 basis points.
PRSD seeks to execute on its investment objectives by primarily investing in short-term investment-grade debt. This includes both public and private credit instruments. This private credit access through the ETF wrapper could prove to be particularly attractive to the investment community.
“Private credit is one of the fastest-growing segments of the market in recent years, but has historically been an underutilized allocation in portfolios,” noted Anna Paglia, chief business officer of State Street Investment Management. “That changed earlier this year when we launched PRIV, the SPDR SSGA IG Public & Private Credit ETF — 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.”
Blending Public & Private Credit Access
The fund constructs its fixed income portfolio using a top-down approach blended with bottom-up stock selection. By doing so, PRSD’s portfolio team looks to construct a risk-conscious fund that overweighs toward attractive sectors and issuers. A short-duration bond fund, PRSD seeks an average duration of one to three years.
Generally speaking, about 10%-35% of PRSD’s portfolio will sit in private credit instruments. Private credit instruments for the fund are sourced by Apollo Global Securities.
This exposure to private credit gives PRSD a compelling use case over other short duration bond funds on the market; namely, the private credit allocation can help diversify, offer new returns, and gain access to a rather elusive market.
“State Street Investment Management continues to bring innovative ETFs to market,” added Todd Rosenbluth, head of research at VettaFi. “Demand for PRIV picked up over the summer. So it is great to see the firm expand its fixed income lineup.”
State Street currently offers more than 170 funds listed in the United States. One of the largest State Street ETFs, the Technology Select Sector SPDR Fund (XLK), has over $84 billion in assets under management.
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