Private credit boom behind new ETF designed for retail investors

It’s a partnership designed to give retail investors more access to a rapidly expanding asset class: Private credit.

Simplify Asset Management and VettaFi launched the actively managed Simplify VettaFi Private Credit Strategy ETF (PCR) on Wednesday.

“The role of private credit in the portfolio is something that has historically only been available to very high-net investors and institutional investors,” Simplify Managing Director Paisley Nardini told CNBC’s “ETF Edge” this week.

According to Nardini, the new ETF’s strategy is unique because it’s not going to be the traditional private credit that includes lockups and high fees.

“This is an efficient liquid vehicle that’s going to provide indirect exposure to the BDCs [business development companies] or the closed-end funds that are investing in these companies,” she said. “You can get access to a direct, liquid play on private credit through an ETF like PCR.”

Nardini points to the private credit boom as a catalyst for the decision to team up with VettaFi. She contends the asset class’ ability to provide an income stream can be a valuable tool for retail investors, too.

“One of the main benefits and reasons we’ve seen this rush… is that it can provide low to even high, double-digit type income and distribution yield,” Nardini added.

The Simplify VettaFi Private Credit Strategy ETF is based on an index developed by VettaFi.

“There’s a quality and a liquidity screen that’s part of this process. So, we’re continuing to call the universe and make sure that it’s appropriate, and it’s accessible for investors,” said Todd Rosenbluth, the firm’s head of research, said in the same interview.

And he anticipates the new offering will grab investors’ attention.

“We recently at VettaFi did a survey for advisors as to how they were looking to diversify their portfolio, and what was compelling to me was more people chose private credit than digital assets,” Rosenbluth said. “So, more people were interested in getting exposure to the ETF wrapper through something that is very hard to find right now as opposed to bitcoin.”

He views private credit a portfolio diversifier — suggesting an allocation of 5% to 10%.

As of Friday’s close, the Simplify VettaFi Private Credit Strategy ETF is virtually flat since its Wednesday debut.