Private Credit Gold Rush

There’s a fresh gold rush in private markets.

Fund managers for private assets have been flocking to retail investors in many forms and fashions. In particular, there’s been a lot of talk about private credit becoming part of the nearly $14 trillion global market of exchange-traded funds, as estimated by Bloomberg Intelligence. Apollo Global Management this week broke ground as it partnered with State Street Corp. to try and make that happen in the US.

State Street filed for an ETF that Apollo will source private-credit assets for, and Apollo has “contractually agreed to provide intraday, executable firm bids,” according to a regulatory filing this week.

“In other words, they’re going to backstop it, and if they can make the private-credit portion liquid, and the public bonds are already liquid, you’re in business,” BI’s Eric Balchunas, who oversees ETF coverage, told us during Bloomberg Television’s “Wall Street Beat” this week.

This has been hard to accomplish, though many — including BlackRock Inc. and Invesco — are trying to find ways to bring private assets to ETF investors in different ways. US regulators currently allow ETFs to have only about 15% of their holdings in illiquid assets. However, we’ve previously reported that Apollo has been building out a trading desk for investment-grade private loans. By making the private markets more liquid, they’re also essentially creating a vehicle in which regulators can become more comfortable with such a move.

Regulators still need to approve the fund. But fund managers are “sitting out there in labs everywhere trying to figure out how to ETF-ize private credit and private equity,” Balchunas said. “There are less companies going public. Investors out there, they definitely want access.”

And one question is: Will other big market makers step up to help make the private markets look even more like the public ones?

‘One-Stop Portfolio’

This push for private wealth money looks different everywhere. The ETF is just one such move to tap into these types of investors. BlackRock separately this week said it’s teaming up with Partners Group Holding AG to offer retail investors a “one-stop portfolio” in 2025, where the duo is simplifying the way they can allocate money toward typically complicated private investments.

“In a world where private markets are growing by $1 trillion or more every year, many financial advisers still find it too difficult to help their clients participate,” Mark Wiedman, the head of BlackRock’s global client business, said in a statement. “We aim to crack that.”

BlackRock, the largest fund manager in the world, this year has agreed to two acquisitions that push it deeper into private markets. So there’s been a looming question of how far this push might go, and what types of new investors it can bring to private markets along the way.

For its part, Apollo is selling about $1 billion worth of products a month to wealthy individuals, the firm’s co-president said during an investor presentation this week. It has added roughly 200 people working in wealth over the past three years alone. The products being offered to retail span credit, real assets, infrastructure and equity.

It’s true that every major private-asset manager is pushing into the private-wealth business, estimated to be an almost $180 trillion market. Apollo estimates the institutional market, which has more traditionally been the major investor for private assets, to be a roughly $100 trillion market. You can see just by the dollars why this is such a big opportunity.

More to come. Next week I'll be down in Washington DC for part of the week for the Financial Markets Quality conference, hosted through Georgetown University's McDonough School of Business. I'll be interviewing CFTC Chair Rostin Behnam on Tuesday morning, while my colleague Michael McKee will be speaking to Nellie Liang of the US Treasury Department. Jamie Dimon is speaking right after. I'll be back to New York in time to help cover Fed day on Wednesday!! Tips, ideas and opinions -- please send to [email protected].