The BondBloxx ETF is making a big bet on private credit.
Despite concerns on Wall Street that an industry meltdown is imminent, the company’s co-founder and chief operating officer believes private credit is a smart way for investors to pursue income.
“What you’re seeing in the press…is probably a fund with one manager and one manager’s assets. [are] It’s marked down, and that’s what will happen. There could be a concentration in that manager’s approach or in the loans or the companies participating in the fund,” Joanna Gallegos said on CNBC’s “ETF Edge” this week.
Gallegos, former head of global ETF strategy at JPMorgan Asset Management, argues that BondBlocks’ approach to private credit protects investors because it is designed to provide “huge diversification.”
“Because that’s the way it is. [BondBloxx Private Credit CLO ETF (PCMM)] “Eighty percent of the exposure for this product is private credit, so we can leverage purely private credit,” she said. And for other vehicles and ETFs, I think there was a lot of discussion about the possibility of not having 100% private credit. ”
The firm launched the BondBloxx Private Credit CLO ETF in December 2024, touting it as the first ETF to offer investors direct exposure to private credit.
As of Wednesday’s market close, FactSet reported the fund was up 7% since its inception and 2% over the past three months.
“There are good reasons to consider private credit.”
Gallegos believes the yields generated by private credit remain attractive.
“This is a good reason to look at private credit. The reality is that more companies are going private than ever before,” Gallegos said, adding that the fund spreads its exposure across many loans and managers, rather than relying on a single manager or concentrated credit pool.
Strategas Securities’ Todd Thorne said in the same ETF Edge interview that he doesn’t see widespread stress across credit markets at this point.
“Credit spreads, whether high yield or investment grade, are still at multi-decade lows,” said the firm’s senior ETF and technical strategist.
But a “credit event” is on his watch list.
“If some of the private credit that is in the illiquid area starts to leak into other areas of the financial system…that to me is a clear sign of risk and I think it’s there. Frankly, everything else seems fine so far,” Song said. “Banks are still OK. Consumers seem to be OK. But I think it’s probably going to be some credibility from the left that leaks into other areas that we’re not focused on.”
