Simplify Asset Management and VettaFi have introduced a new exchange-traded fund (ETF) that enables retail investors to tap into the rapidly growing private credit market.
The Simplify VettaFi Private Credit Strategy ETF (PCR), an actively managed fund, was launched last week. The fund’s primary objective is to offer an efficient and liquid medium for indirect exposure to business development companies (BDCs) or closed-end funds that invest in these entities.
“This is not the traditional private credit that includes lockups and high fees,” said Simplify Managing Director Paisley Nardini in a conversation with CNBC. She pointed out the private credit boom as a significant factor behind the collaboration with VettaFi.
Nardini is optimistic about the potential of this asset class to generate a steady income stream, which could be advantageous for retail investors. “It can provide low to even high, double-digit type income and distribution yield,” she further added.
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The newly launched ETF is based on an index developed by VettaFi. Todd Rosenbluth, the company’s head of research, expects the offering to pique investors’ interest. He perceives private credit as a portfolio diversifier, recommending an allocation of 5% to 10%.
The introduction of this ETF marks a significant milestone in the financial industry, as it opens up the private credit market, traditionally reserved for institutional investors, to retail investors.
This development comes amidst a boom in the private credit sector, offering an opportunity for retail investors to diversify their portfolios and potentially generate substantial income.
The fund’s structure, which avoids traditional lockups and high fees associated with private credit, makes it an attractive option for retail investors.
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