Lessons From Private Credit ETF PRIV Debut

To many of us in the industry, it was a head-scratching moment to have regulators chime in with concerns after the fund was already publicly listed and trading. 

We spent the week talking to industry participants and market experts, looking to make sense of that unusual sequence of events. It didn’t necessarily spell trouble, but it was a curious departure from what we’ve known. 

Usually, a new ETF filing hits the tape, is acknowledged, and is met by comments (if warranted), followed by some back and forth between asset managers and regulators. It all ultimately leads to a launch. But not this time. The launch came, seemingly, before the conversation. Before the regulatory scrutiny. 

So, what happened? 

Our pursuit of clarification led to a realization about the state of our industry today. We are living in a golden age of ETF product development. We are also living in an investor-beware era. 

In the past couple of years, we’ve seen a series of firsts in ETFs. From spot crypto funds to income-seeking and buffered crypto exposures, there’s a whole new category of ETFs to explore. That includes a vast number of derivatives-based, single stock, leveraged and inverse plays, as well as money market ETFs, new factor approaches, return stacking, and now private credit in an ETF wrapper, among others. 

That innovation is moving fast, and thanks to Rule 6c-11, moving faster than before, as the launch process is now more streamlined. 

Procedural ease has been met by asset managers who are aggressively competing for white space in a market that keeps breaking demand records. In 2024, an unprecedented $1.1 trillion flocked to ETFs in the U.S. So far in 2025, $200 billion has poured into ETFs in the first two months. More and more firms are vying for a piece of the action, launching products faster than we can keep up. 

Product innovation is great, but disruption at speed can be clunky. Combine that with a deregulatory push and some reshuffling of government processes under a new administration, and things could fall through the cracks. Was an event like PRIV’s after-the-fact regulatory feedback an oversight? Who knows. 

Either way, as the investor, the takeaway remains the same, but now in bold letters: Do your due diligence.

You can’t just count on regulators to do all the reviewing of new strategies. New ETFs require research, especially those that are breaking new ground. And if you are a fiduciary, evaluating the suitability of new products for clients is a big job that keeps getting bigger, but remains crucial. 

In the case of PRIV, State Street did what it’s been doing for 30-plus years: It innovated.

The fund offers new market access for ETF investors. It is a portfolio of public and private credits, with private assets representing as much as 35% at any given time. Traditionally, ETFs aren’t allowed to allocate more than 15% to illiquid assets, but PRIV does exactly that, with a novel structure that relies on Apollo Global Securities to provide liquidity as needed. 

To quote Aisha Hunt, a ‘40 Act attorney and principal at Kelley Hunt, “The Apollo bid facility is an elegant workaround to the 15% illiquid asset cap, but it walks a tightrope on regulatory interpretation. The SEC’s message? If you’re pushing the envelope, expect closer scrutiny of your disclosures.”

“PRIV was a test case—one that just reset the bar for what the SEC expects from private credit ETFs,” she said. “Issuers that launch these ETFs will need to ensure their structures and disclosures align with heightened regulatory expectations.”

It’s still early days for PRIV to deliver on its value proposition. We will all be closely watching how the strategy navigates liquidity, valuation and pricing, as well as trading. This is the type of product innovation that can move the needle for investors who may not have been able to access private credit before. 

The fund’s newsworthy path to mainstream attention tied to the post-launch SEC comments may soon be just an interesting footnote in the arc of ETF innovation. The story of new access will be the important, long-lasting disruption. But it reminds us, nonetheless, that product development demands our commitment to due diligence and education, with or without regulatory scrutiny. 

At the upcoming Exchange Conference, we will have the opportunity to dive into all sorts of product innovation, market trends and industry news. We hope you will join us for the conversation. Have you signed up yet? Get your pass right here.

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