Experts warn ETF wrappers could erode private credit yields

InvestorDaily

At the Australian Wealth Management Summit in Sydney, industry leaders warned that efforts to wrap an inherently illiquid asset class in the world’s most liquid investment vehicle risk undermining both returns and investor confidence. “We have to be careful when we talk about ETFs because we’re turning something illiquid into something liquid, and off we go,” said Stéphane Blanchoz, BNP Paribas Asset Management’s head of alternative solutions, at the summit on Friday. “I’ve seen many initiatives to have a private credit ETF, and we’ve seen that in the US, but to me it’s not conclusive yet.”

Blanchoz warned that using an exchange-traded fund (ETF) to access a traditionally illiquid asset class could come at the expense of returns, making the structure risky. “If you want to make the trade-off between liquidity and return, it’s not to go to the ETF market to find this type of trade-off. You’re going to have issues on fees, you’re going to have issues on other aspects of the trade,” he said. “ETFs to me is a way to try to provide liquidity to something that should not be liquid by definition, and it’s going to be done at the expense of further fees so we have to be very careful.”

The rest of this article can be found at investordaily.com.au.