Increasing Access To Private Markets through ETFs
A look at an ETF that facilitates access to Private Credit and the OSC's exploratory actions to increase retail access to private markets.
In February 2025, State Street Global Advisors (SSGA) launched the SPDR® SSGA Apollo IG Public & Private Credit ETF (Ticker: PRIV), a groundbreaking development within the U.S. ETF landscape due to the fund's ability to invest in private credit directly. As such, investors in the fund will have direct exposure to private credit, an asset class characterized by its provision of financing to private companies by non-bank institutions.
When PRIV was initially submitted to U.S. regulators for review, the immediate concern was the fund's liquidity, given that private credit investments are typically illiquid. The solution to this concern was SSGA entering into a partnership with Apollo Asset Management, an American asset management firm that primarily invests in alternative assets. In this partnership, Apollo would supply private-credit assets for the fund to buy and also agree to purchase those investments from the fund up to an undefined daily limit. The manager will determine the allocation to private credit within the fund; and it will vary depending on several factors, as stated in the prospectus.
Though there is an established (i.e., direct) relationship with Apollo, the fund's FAQ notes that PRIV can trade with any broker-dealer that wishes to source and sell private credit assets to the fund. Thus, the fund has some flexibility in acquiring and selling private credit investments.
Private Credit ETF Investing in Canada
For Canadian investors seeking to gain exposure to private credit, the Accelerate Diversified Credit Income Fund (Tickers: INCM/INCM.U) is Canada's first private credit ETF. Launched in May 2024, INCM seeks to deliver exposure to alternative income sources compared to traditional fixed-income funds by focusing on the private credit, direct lending, asset-backed and mortgage-backed securities market. INCM gains exposure to listed securities containing direct loans to private corporations, collateralized loans and mortgages, along with other debt instruments such as collateralized loan obligations (CLOs) by investing in listed business development companies (BDCs), closed-end funds (CEFs) and Exchange-Traded Funds (ETFs), with an emphasis on BDCs and CEFs holding floating-rate loans.
Given the emphasis on BDCs, it should be noted that they are a specific corporate structure for companies that provide capital to smaller and midsize companies and distressed businesses in need of capital. Hence, INCM has indirect private credit exposure, given that Accelerate buys liquid private-credit funds and trades them in the secondary market. The fund aims to generate a 10% yield, which is paid monthly.
As noted in a previous article about INCM's launch, private credit has a distinct value proposition that could benefit investors.
Increasing Access to Private Markets
With individual investors becoming more sophisticated, there is growing interest in gaining access to private market opportunities. The Ontario Securities Commission (OSC) recently published a consultation paper entitled: Opportunity to Improve Retail Investor Access to Long-Term Assets through Investment Fund Product Structures, aimed at facilitating retail access to illiquid investments. The consultation proposes the creation of a new investment fund category, the Ontario Long-Term Asset Fund (OLTF), which would allow Ontarians to invest in assets they may not traditionally have exposure to, such as venture capital, private debt and equity, and infrastructure and natural resource projects.
As outlined in the paper, an OLTF would fall within the definition of a mutual fund (which included ETFs, as defined by the OSC) or a Non-Redeemable Investment Fund (NRIF), however, many of the current requirements applicable to those types of funds would not be appropriate to OLTFs, necessitating a unique regulatory framework that balances flexibility with investor protection. Furthermore, OLTFs would not be subject to the illiquid asset restrictions applicable to other investment funds. As such, they would need to address inherent risks associated with illiquid investments, such as liquidity, volatility, concentration, duration, and informational asymmetries, by incorporating robust requirements and protections.
This proposal by the OSC acknowledges that the investment opportunity set for retail investors needs to expand to meet the realities of the current investment ecosystem. While there is no stated time frame for this proposal, it indicates that change may be on the horizon.
For Canadian ETF investors seeking access to private markets, INCM is an investment solution currently available for consideration. However, as the OSC proposal suggests, a pathway for more private market investment solutions is seemingly emerging in the future.
Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.
