Apollo and State Street’s Groundbreaking ETF Proposal

Thaddius Gamueda 
Staff Writer

Exchange-traded funds, ETFs, are some of the most popular investments for many levels of investors. Whereas stocks are made for investing in a singular company, ETFs are very diversified, and in simple terms, a bundle of individual investments. ETFs are usually growth based and they can invest in a multitude of options from real estate to S&P 500 companies. These investments are easily accessible to public investors, but this new proposal that is spearheaded by Apollo Global Management and State Street creates a new kind of ETF that allows investors to tap into both public and private credit markets, the first of its kind. 

Who are Apollo and State Street? 

Apollo Global Management is a leading asset manager that, as of March 2024, has 671 billion dollars in assets under management. As the firm has continued to grow since its inception in 1990, they have acquired many other firms, such as: Voya, Lincoln, Venerable and Jackson National Life. As the company has grown, they’ve created subsidiary companies like European Principal Finance who focus on European opportunities for investors, and Athene Holdings

who became a leading retirement services company before they merged with Apollo under one name. State Street traces its roots back to colonial America under its predecessor, Union Bank. State Street has over 230 years of financial experience in the U.S. and won best Asian Lender of the Year according to the Securities Finance Times. State Street manages assets including, to real estate, stocks, exchange traded funds, derivatives, private equity and fixed income assets in the U.S. and foreign as well. 

What’s so Special about this Proposal? 

ETFs use publicly traded securities that are debt or equity securities. Equity securities are based off the company’s equity, while the debt securities are based off the debt of the company that can be publicly traded to any investors in the market. ETFs have historically been bound to these investments. Private credit, the main selling point of this new ETF, is a loan that is given outside of the traditional banking system to companies. This kind of debt is only available to the wealthiest investors. However, through this new ETF, normal investors can now bypass the hefty initial contributions that private credit investments usually have. This proposal aims to appeal to a wide client base and plays to the strengths of both Apollo and State Street. In the past decade, private market assets have tripled in value and have become one of the more lucrative investments for investors. Because these investments are very illiquid, putting them within a publicly traded ETF bypasses many hurdles that investors would have to overcome and helps diversify their investments in the private credit industry.  

How are Apollo and State Street Getting Around these Obstacles? 

Private credit is illiquid compared to their public counterparts. This is because private credit is owned by the lenders, while public credit is held across funds and many investors in the market. To give many of these investments the liquidity that is sought after, Apollo and State Street are in a contractual agreement where Apollo will purchase private credits for the fund and buy them back if there is a request by State Street. This workaround allows for many private assets to be tradable by investors during the day because they will have a public price on them. Although this agreement is an innovative idea, investors need to understand the risks of having one company hold all the weight in their portfolios. 

What is the Outlook for Investors? 

If Apollo can’t uphold the standard set by the contract, it will set many investors back financially. Although this may be intimidating, the private credit market has almost tripled in the past decade and is a very alluring investment; only large institutional investors have had the luxury of having these private credit assets. Many normal investors have been patiently waiting for the right chance to diversify their portfolios, and this ETF is their chance. With the influx of new investors, the private credit market will only grow. Normal investors and institutional investors alike will benefit together and create a new investing landscape for years to come.  

Contact Thaddius at thaddius.gamueda@student.shu.edu