Key Takeaways
- • BondBloxx will launch the BondBloxx Private Credit CLO ETF (PCMM) on Tuesday, December 3, 2024, described by the firm as the first ETF offering direct exposure to private credit.
- • PCMM will invest at least 80% of its assets in private credit collateralized loan obligations (CLOs), giving access to middle market loans that have largely been limited to large institutional and high net worth investors.
- • Private credit is cited as a segment representing more than $30 trillion in the U.S. financial markets (McKinsey, as of 2023), while the U.S. has approximately 300,000 middle market companies generating $13 trillion in annual revenue.
- • Macquarie Asset Management, which manages approximately $633.7 billion in assets, serves as the fund's sub-adviser; Vivek Bommi, Head of Leveraged Credit, is quoted on the launch.
- • BondBloxx positions PCMM as a strategic allocation, a complement to broader credit exposure, or the liquid portion of private credit and alternatives allocations.
Summary
BondBloxx, a fixed income-focused ETF provider, will launch on Tuesday, December 3, 2024, the BondBloxx Private Credit CLO ETF (PCMM), which the firm says is the first ETF to offer investors direct exposure to private credit. According to the company, access to the asset class has to date been limited primarily to large institutional and high net worth investors. The firm cites private credit as a fast-growing segment of U.S. financial markets representing more than $30 trillion, a figure it attributes to McKinsey as of 2023.
PCMM invests at least 80% of its assets in private credit CLOs and targets private credit middle market companies. BondBloxx cites approximately 300,000 middle market companies in the U.S., generating $13 trillion in annual revenue and representing one-third of U.S. private sector GDP, citing Next Street and JPMorgan data as of November 2023. A stated feature of the fund is the ability to hold private credit CLOs from any major underwriter, which BondBloxx says broadens the opportunity set across the middle market rather than relying on a single underwriter.
Leland Clemons, Founder and CEO of BondBloxx, said the launch brings private credit to ETFs. Co-founder Tony Kelly described the fund as an efficient way to participate in private credit with the liquidity, transparency, and cost advantages of an ETF. Macquarie Asset Management, which acts as sub-adviser, said through Vivek Bommi, Head of Leveraged Credit, that the fund leverages its private markets expertise to meet client demand. Macquarie reports approximately $633.7 billion in assets under management as of September 30, 2024.
BondBloxx outlines three potential uses for the fund: a strategic allocation seeking enhanced returns and diversification, a complement to broader public and private corporate bond exposure within fixed income, and the liquid component of private credit and alternatives allocations. The firm notes that the fund carries risks including CLO structural risk, liquidity risk, credit risk, prepayment risk, and default risk, which may be heightened for middle market CLOs whose underlying loan portfolios are typically smaller than those of broadly syndicated CLOs. Foreside Fund Services, LLC is the distributor.
PCMM invests at least 80% of its assets in private credit CLOs and targets private credit middle market companies. BondBloxx cites approximately 300,000 middle market companies in the U.S., generating $13 trillion in annual revenue and representing one-third of U.S. private sector GDP, citing Next Street and JPMorgan data as of November 2023. A stated feature of the fund is the ability to hold private credit CLOs from any major underwriter, which BondBloxx says broadens the opportunity set across the middle market rather than relying on a single underwriter.
Leland Clemons, Founder and CEO of BondBloxx, said the launch brings private credit to ETFs. Co-founder Tony Kelly described the fund as an efficient way to participate in private credit with the liquidity, transparency, and cost advantages of an ETF. Macquarie Asset Management, which acts as sub-adviser, said through Vivek Bommi, Head of Leveraged Credit, that the fund leverages its private markets expertise to meet client demand. Macquarie reports approximately $633.7 billion in assets under management as of September 30, 2024.
BondBloxx outlines three potential uses for the fund: a strategic allocation seeking enhanced returns and diversification, a complement to broader public and private corporate bond exposure within fixed income, and the liquid component of private credit and alternatives allocations. The firm notes that the fund carries risks including CLO structural risk, liquidity risk, credit risk, prepayment risk, and default risk, which may be heightened for middle market CLOs whose underlying loan portfolios are typically smaller than those of broadly syndicated CLOs. Foreside Fund Services, LLC is the distributor.
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