Yahoo Finance

(Bloomberg) -- The US Securities and Exchange Commission expressed concerns over a much-anticipated private credit exchange-traded fund from Wall Street giants State Street Corp. and Apollo Global Management Inc., asking the firms for more information in a letter Thursday.

Most Read from Bloomberg

• Cuts to Section 8 Housing Assistance Loom Amid HUD Uncertainty

• The Trump Administration Takes Aim at Transportation Research

• Shelters Await Billions in Federal Money for Homelessness Providers

• NYC’s Congestion Pricing Pulls In $48.6 Million in First Month

• New York’s Congestion Pricing Plan Faces Another Legal Showdown

The regulator has concerns over the fund’s liquidity, its name and its ability to comply with valuation rules, according to the letter. It came after the ETF officially launched on Thursday, debuting on the New York Stock Exchange under the ticker “PRIV.”

While the ETF will cap investments deemed illiquid at 15% to conform with SEC requirements, its private credit exposure is generally expected to comprise 10% to 35% of the portfolio, a separate filing shows.

“We have concerns regarding the Fund’s liquidity risk management program,” Brent Fields, the associate director of the SEC’s division of investment management, wrote in the filing.

A representative for State Street declined to comment, while a representative for Apollo didn’t immediately provide a comment.

In filings, the ETF said that Apollo signed an agreement with the fund to provide firm bids on deals it’s sourced on a daily basis and at certain intervals, in an effort to show liquidity. But that is drawing concerns from the SEC, which said that it wouldn’t be enough to “rely solely on bids from Apollo” to ensure liquidity.

The SEC also expressed concern about the fund’s name, SPDR SSGA Apollo IG Public & Private Credit ETF. As Apollo does not have an obligation to sell any debt to the fund and it’s not an adviser or sponsor to it, it’s “misleading” to have the ETF named after the credit giant, the regulator said.

The commission also highlighted the ETF’s ability to redeem its securities on demand from shareholders at a price approximating their proportionate share of the fund’s net asset value at the time of redemption.

Private credit has historically been illiquid and difficult to trade. Apollo, like some of its industry peers, has been looking to change all that by building a secondary market devoted to the asset class.

The ETF may also “achieve exposure” to private credit instruments by investing in interval funds or business development companies, which focus on providing direct loans, though these will be limited to 15% of its net assets, a fund filing shows.