SEC Flags Liquidity Concerns Over Newly Launched Private Credit ETF

The U.S. Securities and Exchange Commission (SEC) has raised concerns about the SPDR SSGA Apollo IG Public & Private Credit ETF, just hours after it began trading. In a rare move, the SEC’s Brent Fields, associate director of the investment management division, issued a letter questioning liquidity risks and compliance with valuation rules.

State Street (NYSE:STT) Global Advisors, which launched the ETF, has yet to address what the SEC called "significant outstanding issues." One major concern is the fund’s allocation to illiquid securities, which could reach 35%—well above the SEC’s 15% limit. State Street has relied on a liquidity commitment from Apollo Global Investors to justify this exposure, but the SEC remains skeptical.

The letter also called for removing Apollo Global Management’s (NYSE:APO) name from the ETF, stating it could mislead investors regarding Apollo’s actual involvement. Experts say such regulatory intervention after an ETF’s launch is highly unusual. Todd Sohn, an ETF analyst at Strategas, noted, “It’s odd timing, given that the ETF has already started trading.”

Morningstar analyst Bryan Armour emphasized the broader implications for other asset managers planning private credit ETFs. While the SEC has not indicated penalties, it retains the authority to halt trading if concerns are not resolved.

State Street confirmed it will respond but provided no further comment. The SEC’s scrutiny signals heightened regulatory oversight for ETFs venturing into private credit markets.