Simplify Asset Management on Tuesday announced the launch of the Simplify VettaFi Private Credit Strategy ETF (PCR), which represents the firm’s entry into private credit and, it said, gives investors private credit exposure with a credit hedge strategy.
The new ETF’s strategy is to track the returns of the VettaFi Private Credit Index, which is based on business development companies (BDCs) and publicly traded closed end funds (CEFs) that are mainly invested in private credit, according to Simplify.
PCR arrives amid growing demand for private credit, which has become one of the key areas in the push to bring private markets investments to more investor groups.
“Private credit has seen tremendous growth over the past decade as institutional and high net worth investors have increasingly turned to the category for yield and the powerful role it can play in diversifying a traditional 60/40 portfolio,” David Berns, Chief Investment Officer and Co-Founder of Simplify, said in a news release announcing PCR’s launch.
“However, for most investors, access to this market has typically been limited or marked by high fees, complex tax reporting, and severely limited liquidity,” according to Berns.
PCR delivers a “compelling, liquid private credit solution that improves investor access and combines attractive potential income with credit hedges,” he said.
“We believe BDCs and private credit-focused CEFs can offer more attractive yields than traditional high yield bond funds.” – David Berns, Chief Investment Officer and Co-Founder, Simplify Asset Management
Berns added, “We believe BDCs and private credit-focused CEFs can offer more attractive yields than traditional high yield bond funds. On top of that, PCR’s built-in credit hedge is designed to help manage downside risk during credit events and periods of credit spread widening.”
Minimum market capitalization and liquidity requirements are required for PCR’s eligible potential index constituents, which are selected according to percentile scores for volatility and yield, according to Simplify.
PCR is part of the alternatives and income-focused segments of Simplify’s ETF portfolio, which this year has added new barrier income and target distribution ETFs in May, a long/short currency strategy and other offerings, it said.
"Simplify has a history of making institutionally-oriented strategies, especially alternatives, available to our clients, with examples including CTA — our managed futures ETF — and the more recently launched FOXY, which aims to harvest yield in the currency market,” Chris Getter, Managing Director, Emerging Markets Strategist at Simplify, told WSR on Tuesday.
Assets managed in the private credit space are expected to grow 20 to 25% a year through the end of this decade, Getter said.
He added, “Based on what we have been able to build and the expertise we have been able to deploy in other alts strategies, private credit emerged as an area where we believed we could structure a differentiated product that provides tangible value to advisors and their clients. We take the construction of our funds seriously, so we launched PCR when we felt confident in our ability to meet those objectives.”
Simplify ETFs are distributed by Foreside Financial Services.
Jeff Berman, Contributing Editor and Reporter at Wealth Solutions Report, can be reached at jeff.berman@wealthsolutionsreport.com.
