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BondBloxx ETFs has been making a big bet in private credit.
Even with Wall Street fears of an impending meltdown in the space, the firm’s co-founder and chief operating officer is confident private credit is a sensible way for investors to pursue income.
“What you’re seeing in the press… maybe a fund of one manager and one manager’s assets [are] being marked down, and that’s going to happen. There may be a concentration in that manager’s approach or in the loans and the companies that are in their fund,” Joanna Gallegos told CNBC’s “ETF Edge” this week.
Gallegos, who’s the former head of global ETF strategy at J.P. Morgan Asset Management, contends BondBloxx’s approach to private credit protects investors because it’s designed to give “immense diversification.”
“Because of the way it’s [BondBloxx Private Credit CLO ETF (PCMM)] structured, you’re getting exposure to almost over 7,000 of those loans,” she said. “It gives you a pure play to private credit because 80% of the exposure in that product is private credit. And I think there’s been a lot of discussion about other vehicles and ETFs that there may not be 100% private credit.”
The firm launched its BondBloxx Private Credit CLO ETF in December 2024 — promoting it as the first-ever ETF that offers investors direct exposure to private credit.
As of Wednesday’s market close, FactSet reports the fund is up 7% since its inception and up 2% over the past three months.
‘There’s good reason to look at private credit’
Gallegos finds the yield generated by private credit is still attractive.
“That’s a good reason to look at private credit. The reality is that more companies are private than they used to,” said Gallegos, who added that the fund spreads exposure across many loans and managers rather than relying on a single manager or a concentrated pool of credits.
In the same “ETF Edge” interview, Strategas Securities’ Todd Sohn said he didn’t see broad stress across credit markets right now, too.
“Credit spreads are still on multi-decades lows, whether it’s high yield or investment grade,” the firm’s senior ETF and technical strategist said.
However, a “credit event” is on his watch list.
“If any of this private credit in the illiquid space starts to leak into other areas of the financial system… that would be my kind of a glaring sign of risk I think that’s out there. Quite frankly, everything else so far seems all right,” Sohn said. “Banks are still okay. The consumer seems all right. But I think it would be some sort of credit then out of left field that leaks into other areas that we’re not maybe focused on.”
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