How market’s private credit crisis fears are spreading to bond ETFs

Fears of a private credit crisis are rising as firms at the heart of the growing, but less liquid and less transparent, bond market face investor redemptions. That stress test has arrived just as private loans became more prevalent in the ETF market. It was a little over a year ago that the Securities and Exchange Commission approved the first ETF branded as a private credit fund.

For ETF investors, the good news it that the risks represented by the asset class are showing up in a more controlled way, as ETFs invest directly in private credit issues are still limited in how much exposure they can have to the asset class — up to, but not exceeding 35%.

Some other, older ETF products that are tied to private credit get indirect exposure only, according to Todd Rosenbluth, head of research at VettaFi, said on CNBC’s “ETF Edge. They use vehicles like business development companies and closed end funds that primarily invest in the private credit sector. While that adds liquidity compared to holding private loans directly, it is not without investor concern in the current environment.

The VanEck BDC Income ETF (BIZD), which has roughly $1.5 billion in assets and dates back to 2013, is down 13% since the start of the year. The reason is clear: among BIZD’s top holdings are publicly traded shares of some of the private credit managers in the news, including Blue Owl Capital and Ares Capital. Blue Owl shares are down over 46% this year.

The Simplify VettaFi Private Credit Strategy ETF (PCR) is down around 20% in the past year and also focused its investments in business development companies and closed end funds.

Liquidity remains the main concern for investors, and private credit is not meant for daily trading the way ETFs are, which has resulted in issues between private credit managers and investors wanting to pull out their funds. But in the ETF space, daily liquidity and trading always give investors the option to sell, though it may come at a cost.

“You can get out, you’re just going to pay or you’re going to sell at a discount to net asset value,” Rosenbluth said.

BIZD closed at a discount to its net asset value 37 times in calendar year 2025, and so far, 12 times this year.

Private credit funds, meanwhile, often restrict withdrawals during times of stress. “You’re gating because you said we can’t have a run on the bank,” Rosenbluth said.

Limits on redemptions help prevent forced selling and instability, though they don’t necessarily help to calm market fears.

State Street‘s private credit ETFs, developed with alternative investments manager Apollo Global and which included the first private credit branded ETF approved by the SEC, are examples of how access is being structured within ETFs. The State Street IG Public & Private Credit ETF (PRIV) was the first of its kind, approved by the SEC in February 2025. The State Street Short Duration IG Public & Private Credit ETF (PRSD) launched later in 2025.

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