The BondBloxx ETF and Private Credit Investment
The BondBloxx ETF is making significant moves in the realm of private credit.
Even though some on Wall Street are worried about a potential industry collapse, Joanna Gallegos, the co-founder and COO of the company, argues that private credit remains a solid investment option for generating income.
“What you’re seeing reported…likely reflects just one fund managed by a single individual or group. It’s marked down, and that’s what happens. There can be a concentration based on that manager’s methods or the loans and companies involved,” Gallegos explained during a recent appearance on CNBC’s “ETF Edge.”
Previously, Gallegos led the global ETF strategy at JPMorgan Asset Management. She believes that BondBloxx’s method in private credit offers protection for investors through “huge diversification.”
“With the BondBloxx Private Credit CLO ETF, the structure is designed so that around eighty percent of the exposure is in private credit. This gives us the ability to focus entirely on private credit,” she said. “In contrast, other offerings have seen discussions about not being fully aligned with private credit.”
The firm introduced the BondBloxx Private Credit CLO ETF in December 2024, promoting it as the first ETF to give investors direct access to private credit.
According to FactSet, as of the close of the market on Wednesday, the fund had increased by 7% since it started and 2% over the last three months.
Understanding the Appeal of Private Credit
Gallegos finds the yield from private credit appealing. “It’s a compelling reason to explore this sector. More companies are opting to go private than before,” she noted, emphasizing that the fund diversifies its exposure across multiple loans and managers instead of being dependent on just one.
Todd Thorne from Strategas Securities also spoke during the same interview and mentioned that, at present, he doesn’t anticipate widespread distress in credit markets.
“Credit spreads, whether looking at high yield or investment grade, remain at historical lows,” said Thorne, who is a senior ETF and technical strategist at the firm.
However, he is keeping an eye on potential “credit events.”
“If private credit, particularly in less liquid areas, starts to influence other sectors of the financial landscape, that would signal risk,” he remarked. “So far, everything seems stable. Banks appear sound. Consumers look okay. But I suspect there may be some credibility issues from the left that could affect other areas that we aren’t currently monitoring closely.”
