State Street Investment Management has proven that private asset exposure can, in fact, be integrated into the ETF structure. Consider the State Street Short Duration IG Public & Private Credit ETF (PRSD), introduced about a year ago, highlights Tony Dong, lead ETF analyst at ETF Central.
PRSD’s portfolio is constructed around a shorter-duration mandate, giving investors another way to access both public and private investment-grade credit while limiting sensitivity to changes in interest rates. It is an actively managed ETF focused primarily on investment-grade debt securities.
State Street Short Duration IG Public & Private Credit ETF (PRSD)
Investment grade generally means a credit rating of BBB/Baa or higher. That indicates that rating agencies view the issuer as having a comparatively lower risk of default than below-investment-grade borrowers.
As of Sept. 4, PRSD had an option-adjusted duration of 1.96 years. All else being equal, that implies the portfolio's value would be expected to fall by approximately 1.96% if interest rates rose by one percentage point, or rise by approximately 1.96% if rates fell by one percentage point. In practice, other factors such as changing credit spreads can also affect bond prices.
The more unusual part of PRSD is its private credit allocation. The fund generally expects to allocate between 10% and 35% of its portfolio to private investments, which may be sourced through Apollo Global Securities.
Unlike the publicly traded bonds making up most of the portfolio, these investments provide exposure to privately originated credit opportunities that most ETF investors wouldn't ordinarily encounter directly.
