The exchange-traded fund industry is making a push to offer retail investors more access to alternative investments, including private credit, typically reserved for the ultrawealthy and financial institutions. BondBloxx, a firm co-founded by Joanna Gallegos, recently launched the BondBloxx Private Credit CLO ETF (PCMM) to provide investors with exposure to this asset class.
Gallegos believes that opening up access to private credit is a positive development, despite the asset class’s reputation for high fees and lackluster returns. She emphasized the importance of connecting markets and giving individuals the opportunity to include such a powerful tool in their investment portfolios. The PCMM ETF primarily invests in private credit collateralized loan obligations and has seen a 1% increase since its inception on December 3rd.
In a recent interview on CNBC’s “ETF Edge,” Gallegos highlighted the ETF’s performance during a volatile market period. While major indices like the S&P 500 and Nasdaq experienced significant declines, the BondBloxx Private Credit CLO ETF remained relatively stable.
However, not everyone is convinced of the benefits of alternative investment ETFs. Todd Sohn, managing director of ETF and technical strategy at Strategas Securities, believes that most retail investors do not necessarily need exposure to these complex assets. He argues that a diversified portfolio of low-cost ETFs can provide sufficient diversification and returns for the average investor.
Despite differing opinions on the value of alternative investment ETFs, the industry continues to evolve to meet the needs of a broader range of investors. Gallegos remains optimistic about the future of these products, citing the success of high-yield ETFs as a potential roadmap for the growth of alternative investment offerings. As the market continues to adapt and innovate, retail investors may have more opportunities to explore and diversify their portfolios with previously inaccessible asset classes.
